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GST On Life Insurance: All You Need To Know

Understand GST on life insurance, applicable rates, calculation method, and how GST affects policy premiums in India.

Written by : Knowledge Centre Team

2026-02-10

2898 Views

10 minutes read

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The Goods and Services Tax, also known as GST, has been widely discussed in India ever since it was announced in 2017. This is because hardly any sector across the nation has been left untouched by the introduction of GST and its subsequent evolving regulations. Unsurprisingly, this holds true for the country’s insurance sector as well.

Initially, GST replaced the earlier service tax, increasing life insurance premiums and making policies slightly costlier for policyholders. At the same time, it also brought much-needed transparency and uniformity to insurance taxation.

However, in the new GST 2.0 update, the GST Council announced that, effective September 22, 2025, GST on life insurance premiums has been reduced to nil. This move covers all major individual policy types, including term insurance, ULIPs, endowment plans, and riders. For both new and existing policyholders, this reform translates into meaningful savings and makes life insurance more accessible than ever before.

Let us discuss the impact of GST on life insurance plans.

What is GST?

Before delving into the impact of GST on life insurance plans, let us review what the Goods and Services Tax represents. GST is essentially a form of indirect tax that was brought into effect in 2017 as a means of eliminating the complicated landscape of India’s various other indirect taxes. These indirect taxes had long been believed to be redundant, convoluted, and even exploitative, placing a huge burden on the end consumer. With GST, all such taxes were bundled up to fall under a single, standard umbrella, simplifying the indirect taxation process considerably.

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GST on Life Insurance

Prior to GST, life insurance premiums were subject to service taxes, which amounted to 15% and comprised of taxes such as Basic Service Tax, Swachh Bharat Cess, and Krishi Kalyan Cess. After the implementation of GST, the GST on life insurance plans amounted to a standard 18%. This increase from 15% to 18% had an impact on the end consumer, that is, the policyholders, by raising the premiums they were expected to pay for their policies. While the primary effect of GST on life insurance plans was the increase in the premium amounts, it aided the life insurance sector in other ways.

However,  the GST Council has announced that GST on life and health insurance premiums will be reduced to NIL, effective September 22, 2025. This means policyholders no longer need to pay GST on their insurance premiums, making insurance more affordable and accessible.

Impact of GST 2.0 on Different Life Insurance Plans


Impact on Term Plans, ULIPs, and Endowment Policies

From September 22, 2025, life insurance premiums will be exempt from GST, a move that brings substantial relief to policyholders. Here’s how it plays out across different types of insurance:

  • Term Insurance- Term plans, which offer pure protection, will see the most straightforward benefit. Premiums will now cost less, as the GST portion is removed. For example, on a policy with a ₹10,000 annual premium, policyholders will no longer have to pay the additional ₹1,800 in tax. This means the same coverage can now be secured at a lower price.
  • ULIPs (Unit-Linked Insurance Plans)- ULIPs combine insurance with investment, and earlier, GST was charged on both the premium and associated charges like fund management fees. With the exemption, more of your money will now be directed towards building your investment corpus. Over time, this small shift can translate into improved fund growth and better long-term returns.
  • Endowment Policies- For traditional savings-oriented endowment plans, removing GST reduces the financial burden on premiums. Policyholders may choose to enjoy the savings directly through lower annual payments or use the freed-up amount to enhance their coverage without paying extra.
    In essence, removing GST makes life insurance products more affordable, value-driven, and attractive, especially for individuals balancing multiple policies or looking to increase their financial protection.
trivia-img

Did You Know?

GST was designed as a destination-based tax, meaning the tax revenue goes to the state where the service is consumed, not where it is sold.

 

 Source: CBIC

Young Term Plan - 1 Crore

Saving Tax on Life Insurance Premiums

While GST initially increased the cost of life insurance by raising premium amounts, policyholders have always had the opportunity to offset this expense through income tax deductions. Even after the complete GST exemption from September 22, 2025, these tax-saving benefits continue to add value, making life insurance a smarter financial choice.

The most popular deductions that allow you to save income tax in India, particularly on your life insurance premiums:

  • Section 80C: Under this section, you can avail deductions of up to ₹1.5 lakhs on your overall insurance premiums.

  • Section 10(10D): Exempts the maturity proceeds or payouts from income tax. This applies to both death and maturity benefits, provided the policy meets the conditions specified under the section.

Conclusion

The journey of GST on life insurance has been eventful, starting with higher premiums after its introduction in 2017, bringing standardisation and transparency to insurance taxation, and now, culminating in complete exemption from September 22, 2025. This reform directly lowers costs for policyholders across term plans, ULIPs, and endowment policies, making life insurance far more affordable and inclusive.

To avail a trusted and beneficial life insurance plan for you or your family, look no further than our iSelect Smart360 Term Plan. This term insurance plan provides policyholders with various features such as extensive coverage, payout options, as well as add-on covers to enhance that coverage.

Glossary

  1. GST (Goods and Services Tax): A unified indirect tax introduced in 2017 to replace multiple indirect taxes and simplify taxation in India
  2. Term Insurance: A life insurance plan that provides financial protection for a fixed period in exchange for regular premiums
  3. ULIP (Unit Linked Insurance Plan): A policy that combines life cover with market-linked investments in equity or debt funds
  4. Endowment Policy: A traditional life insurance plan offering both insurance coverage and savings benefits over a fixed term
  5. Section 80C: An income tax provision allowing deductions up to ₹1.5 lakh on eligible investments, including life insurance premiums
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Uncertain About Insurance

FAQs

Earlier, the GST rate on life insurance premiums was 18%, which increased the overall policy cost for customers. However, as per the latest update, the life insurance GST rate has been reduced to NIL from September 22, 2025, meaning no GST is now charged on policy premiums.

With the recent changes, GST on Postal Life Insurance (PLI) premiums has also been reduced to NIL. This means GST on PLI premium or GST on postal life insurance premium is no longer applicable from September 22, 2025, making PLI policies more affordable for policyholders.

With GST 2.0, the GST rate for life insurance premiums has been brought down to zero, so policyholders no longer pay GST on traditional individual insurance plans or policy premiums.

Previously, GST on ULIP plans and other traditional policies was charged at 18%. Under GST 2.0, the GST rate for life insurance premiums has been brought down to zero, so policyholders no longer pay GST on traditional insurance plans or policy premiums.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

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