GST Rates on Term Insurance

GST on term insurance is 0% for eligible individual life insurance policies from 22 September 2025, following the GST exemption introduced by the government. Previously, term insurance premiums attracted 18% GST, increasing the overall cost of coverage. This change allows eligible policyholders to purchase term insurance without paying GST on their premiums.

However, the premium amount still depends on factors such as your age, sum assured, policy term and chosen coverage options. Understanding the applicable GST rates can help you estimate your premium and make informed decisions when choosing a term insurance policy.

Source - https://financialservices.gov.in/exemption-gst-all-individual-life-insurance-and-health-insurance-policies

What is GST on Term Insurance Premiums?

GST refers to the tax charged previously on term insurance premiums in India. Until 22nd September 2025, the term insurance plan is charged at 18% GST. This increases the overall cost of coverage. For example, a base premium of ₹10,000 was charged at 18% as GST. This results in a final premium of ₹11,800.

According to the latest GST reform, individual term insurance is GST free. This means policyholders pay only the base premium amount. This change improves affordability and makes financial planning easier.

What Changed with the New GST Reform?

The GST reform changed how insurers calculate their premiums for individual life insurance policies. From 22 September 2025, eligible individual term plans no longer attract the earlier 18% GST. 

While understanding is GST on term insurance reduced, you must keep in mind that individual policies are currently GST-free, but group term insurance policies are still taxed at 18% GST rate. So, before you calculate your premium, make sure to know which type of term insurance plan you have.

GST Impact: Before vs After 

How Removing GST Boosts Your Term Insurance Savings

Removing GST from your eligible individual term insurance premiums helps reduce your yearly payments compared to before. In fact, your actual savings depend on your premium and how long you maintain your policy. 

Below you can find the table which gives you a comparison of costs at different premium levels:

Note: You can assume the above-mentioned figures as an unchanged annual base premium and 20 annual payments. However, your actual premiums, policy conditions, as well as your payment schedules might differ from this.

Is GST Applicable on Renewal Premiums?

No, your individual term insurance renewal premiums are exempt from GST as they normally fall under the exemption effective from September 22, 2025. Nonetheless, make sure to check the actual payment date and the nature of your policy before calculating your amount due. 

1. Renewal Payments Made on or After 22 September 2025

If you pay an eligible individual term insurance renewal premium on or after September 22, 2025, then the new GST exemption applies to you. For example, if your base renewal premium is ₹15,000, you need to pay ₹15,000 without the earlier ₹2,700 GST. So check your renewal receipt to confirm your premium and applicable charges.

2. Payments Made Before the Effective Date

The new exemption does not automatically refund your GST that you have already paid on an earlier premium. For example, if you paid ₹17,700, including ₹2,700 GST, before the effective date, the reform does not by itself make that earlier payment refundable. So you need to contact your insurer if you need any clarification about your specific payment.

3. Group Term Insurance Renewals

GST at 18% continues to apply to group term insurance renewal premiums, including employer-provided group life insurance. [1] The GST exemption effective from 22 September 2025 applies only to eligible individual life insurance policies.

Source - https://financialservices.gov.in/exemption-gst-all-individual-life-insurance-and-health-insurance-policies

Advantages of the New GST Reform on Term Insurance

The GST exemption on insurance lowers the amount eligible individual policyholders have to pay for their term insurance. The further benefits the policyholders can enjoy due to this exemption are as follows:

1. Lower Annual Premium Payments

The new GST rules already remove the earlier 18% tax from your eligible individual term insurance premiums. For example, a policy with a ₹20,000 annual base premium previously cost ₹23,600. But after the exemption, the annual payment becomes ₹20,000, saving ₹3,600. 

2. Greater Access to Life Cover

Your lower premium payments can normally reduce one of your costs that you consider when you are purchasing life insurance. For instance, a person with a ₹10,000 annual base premium saves ₹1,800 compared with the earlier tax-inclusive amount. However, affordability alone does not always determine how much cover a family generally needs.

3. Lower Costs for Eligible Policy Benefits

The GST exemption naturally covers your eligible individual life insurance services. So if your policy includes optional riders, such as critical illness or accidental death benefits, you might need to confirm how your insurer applies that exemption to each component. 

4. Better Long-Term Budget Planning

Removing your GST can mainly create meaningful savings for you over a long policy term if your base premium remains unchanged. A ₹20,000 annual premium previously included ₹3,600 GST. However, across 20 annual payments, that difference would total ₹72,000. This saving can help you manage your long-term expenses while maintaining financial protection for your family.

Who Benefits Most from Reduction of GST on Term Insurance?

Term Insurance becomes more budget-friendly. With GST gone from individual term insurance, many people can afford life cover. Here are certain groups that gain a bigger advantage.

1. Young Professionals 

Starting out professionally, many younger adults have limited income. GST-free premiums make it simple to buy term insurance. This prevents financial pressure and helps to get secure life cover. 

2. Newly Married Couples

With new responsibilities and expenses, newly married couples benefit from insurance. Lower premiums make it easier to plan a stable future together. The extra GST money is used for other useful purposes. 

3. Sole Earning Members 

For individuals supporting a family alone, the reduced premiums make it easy. The term insurance becomes affordable, straining their budget. Lower cost helps the family maintain long-term financial security. 

4. First-Time Insurance Buyers 

First-time buyers hesitate at the high upfront costs. With GST-free premiums, premiums become lower and more affordable.

Why was GST on Term Insurance Premium Removed?

The GST Council recommended removing the 18% GST on individual life insurance premiums to make life cover more affordable to everyone. It is a big part of the government’s initiative of "Insurance for All by 2047".

1. Encouraging More People to Buy Life Cover

A lower premium can normally help you if you previously found life insurance expensive. For instance, removing ₹5,400 GST from a ₹30,000 annual base premium reduces your yearly payment to ₹30,000. Thus, this change may make it easier for you to consider a suitable cover while you are balancing your essential expenses.

2. Making Insurance More Affordable Across Income Groups

Households with limited disposable income might need to weigh insurance against rent as well as their everyday costs. Therefore, removing this extra tax normally reduces the upfront cost of eligible individual term plans. In fact, a family can then assess how much cover fits in their budget without adding the earlier 18% GST to its premium.

3. Reducing Pressure on Household Budgets

The exemption now gives the eligible policyholders more room in their yearly budgets. For example, a person who previously paid ₹23,600 for a ₹20,000 base premium now pays ₹20,000 under the new rules. So that ₹3,600 difference can normally help him to cover his essential expenses or support his regular savings.

4. Supporting Wider Financial Protection

Affordable premiums might help more families like you to consider financial protection against the loss of an earning member. However, according to the Press Information Bureau, the reform covers all of your individual life insurance policies, including your term plans and endowment policies. 

For you, the practical benefit is just a lower eligible premium, not a reason to buy a policy without comparing its terms. In that case, Shriram Life Insurance offers different life insurance options for you to check out. So take a look at what is available to find the right coverage and premium that fits your needs.

A New Era for Term Insurance Affordability

Due to the new GST reform, buying term insurance is easier. The removal of GST on individual premiums has lessened the overall cost. This allows individuals to get life cover without any extra financial burden. Additionally, this encourages more people to take advantage of a term insurance plan. 

With the 0% GST on term insurance, premiums are now lighter on the pocket. It also helps boost insurance adoption across India.

Final Thoughts

The GST on term insurance is now 0% for eligible individual life insurance policies, helping you to save on your premiums. However, your premium still depends on factors such as your age, coverage amount and policy term. Before choosing a plan, compare the available coverage options, premium costs and policy conditions to find a suitable option for your family's financial protection.

If you are planning to explore different life insurance options at your preferred budget, Shriram Life Insurance can be an option to explore suitable financial protection for your family in the future.

Disclaimer: This information provided is intended for general informational purposes only. For personalised recommendations, please consult a certified insurance professional.