No GST on Life Insurance in India: What You Need to Know in 2026

Written by : Knowledge Centre Team

2025-11-13

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The festive season just got a whole lot brighter for insurance policyholders across India! In a move that has financial experts and families cheering alike, the government has announced the elimination of GST on life insurance premiums. For years, life insurance, whether a term plan, endowment policy, or ULIP, carried an additional 18% tax, making protection and investment slightly more expensive. This “Diwali gift” is being hailed as a game-changer, not just for the immediate savings it brings, but for the long-term impact on financial planning and wealth creation.

In simpler terms, the premium you pay now will go entirely toward coverage and investment, not taxes.

If you’ve been curious about what this exemption or no-GST means for your existing plans, new policies, or even ULIPs, you’re in the right place. Let’s break down this festive gift from the government in a way that’s simple, practical, and relevant for your financial future.

Key Takeaways

From 22 September 2025, individual life insurance premiums are GST-free, improving affordability
Term insurance, ULIPs, and endowment plans benefit directly, while group policies will remain taxed at 18%
More of your premium goes toward actual coverage or investment, strengthening financial planning
The GST relief will encourage reviewing, upgrading, or purchasing new policies to maximise benefits

What Does Exemption of GST on Life Insurance Mean?

Until now, policyholders paid 18% GST on life insurance premiums in India, whether for term insurance, ULIPs, or endowment plans. This meant that a significant portion of your premium went toward tax rather than being use for additional coverage or investment.

With the new GST on life insurance, which will be set to exemption or nil, this extra cost disappears. Policyholders will now get the full value of their premium working for protection and investment, making life insurance more affordable and renewals lighter on the pocket.

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From Which Date Will Life Insurance be Exempt From GST at 0%?

The most crucial question on every policyholder’s mind: When does this new GST rate benefit kick in?

The Finance Ministry has announced that from September 22, 2025, the GST on life insurance premiums will be reduced to 0%. An official notification has been issued by the Government. This will apply to both new policies and renewal of policies with a due date of payment on or after 22nd Sept, 2025.

For policyholders, this means there will be immediate savings on the amount you pay annually or monthly towards your insurance.

Which Policies Will Benefit From the Exemption of GST? Individual vs Group Coverage

Not all insurance policies will enjoy the GST relief, so it’s important to understand which products will be covered and who will actually benefit.

Life Insurance Products Covered:

The GST exemption on life insurance, will cover mostly individual policy types. This may include:

Term Insurance: Exemption from GST on term life insurance premiums see the full benefit. If you’ve been paying GST on term insurance premiums, your next renewal due date of payment on or after this date will reflect no tax, reducing your annual or monthly premium outgo.
Endowment Plans: Long-term savings-cum-protection products also fall under the exemption or no rate GST bracket. This means a larger portion of your premium now goes toward coverage and investment.
Unit-Linked Insurance Plans (ULIPs): Investment-linked plans are included, ensuring both protection and investment grow without an extra tax bite.

Individual Policies vs Group Policies:

While most individual policies will benefit from this GST relief, group insurance policies will not. The exemption will apply exclusively to individual life and health insurance policies. Group policies, on the other hand, will continue to attract the standard 18% GST. These include:

Corporate group term insurance
Employee health insurance plans
Other organisation-sponsored insurance schemes

The rationale behind this distinction may be that the government’s Diwali gift is aimed at households, directly easing the cost burden on individual policyholders. Group plans, being bulk-purchased by organisations, will be treated differently for tax purposes.

Did You Know?

Senior citizens and middle-class individuals are expected to get a huge relief with life insurance being tax-free

Source: financialexpress

Impact on Term Plans, ULIPs, and Endowment Policies

Overall, the impact of GST waiver on term life insurance plans will be direct, tangible, and beneficial, especially for those who maintain multiple policies. Let’s break down how this life insurance GST rate change will affect different products:

Term Insurance GST: Your pure protection plan premium will become cheaper, meaning your family gets the same coverage for less money. For example, a ₹10,000 annual premium that previously included ₹1,800 GST, will save you that amount outright.
ULIPs: Both the insurance cost and the investment portion will benefit from GST relief. Lower tax means a slightly higher proportion of your premium will go towards fund accumulation, boosting your long-term returns.
Endowment Plans: With GST exemption, the savings can either reduce your annual outgo or increase your insurance cover at the same premium.

Why Policyholders Should Care?

The removal of GST on life insurance will not be just a small tax change. It will be a meaningful shift that can positively impact your financial planning and long-term security. Here’s why it matters:

Renewal Savings: For policyholders, one of the most immediate benefits will be savings on renewals. Every renewal due date payment that falls on or after September 22, 2025, onwards will cost less because the GST component will be completely removed. For long-term plans, these savings compound over time, making multi-year policies significantly more affordable. For example, a term insurance plan with an annual premium of ₹50,000 previously attracted ₹9,000 in GST. Post-exemption, that entire amount can be redirected toward your coverage or other financial goals, effectively reducing the long-term cost of protection.
Affordable Coverage: With tax no longer inflating your premium, policyholders have more flexibility. You can choose to save the money, reducing your annual outlay, or upgrade your coverage without paying extra. This is particularly useful for families looking to increase protection for multiple members or for individuals who want higher sums assured without straining their budget. Essentially, the premium you pay now goes entirely toward securing your financial future, not toward taxes.
Boost to Investment in Protection: For investment-linked products like ULIPs, the benefits go even further. With GST exempt, you can get a higher coverage plan. This means more of your premium flows directly into your investment fund, allowing additional money to grow as well due to compounding. This not only strengthens the investment component but also ensures that protection and wealth creation go hand-in-hand. Over the long term, this can lead to noticeably higher fund values, enhancing your ability to meet goals like retirement planning, children’s education, or wealth accumulation.

In short, this GST relief is not just a number on paper. It’s a tangible, year-on-year benefit that allows policyholders to maximise the value of every rupee spent on premium. Whether you’re focused on savings, investment, or pure protection, this change makes life insurance more rewarding and affordable.

Bottom Line

The Exemption of GST on life insurance will make life insurance more affordable. Whether you hold term plans, ULIPs, or endowment policies, the savings from the GST new rate take effect immediately from September 22, 2025. They continue with the tax-free renewal on the due date of payment or after September 22, 2025.

Consider this Diwali season a reminder to review your coverage, check your renewal dates, and enjoy the benefits of paying tax-free premiums. After all, financial protection should never feel heavier because of taxes.

Glossary

Term Plan: A type of life insurance that provides financial protection for a fixed period at an affordable cost.
ULIP (Unit-Linked Insurance Plan): An insurance plan that combines life cover with investment in market-linked funds.
Endowment Policy: A life insurance plan that offers both savings and protection, providing a payout either on maturity or death.
Group Policy: An insurance plan purchased by organisations (like employers) to cover a group of people under one contract.
Rider: An optional add-on to an insurance policy, such as accidental or critical illness coverage that may carry an extra cost

FAQs

The GST on life insurance premiums will be exempt or nil from September 22, 2025. This applies to both new policies and renewals, with the payment due date on or after the date mentioned earlier. Any renewal due date of payment on or after this date will no longer include the 18% GST.

Yes. The exemption of GST benefit covers most individual life insurance products, including:

Term insurance
ULIPs (Unit-Linked Insurance Plans)
Endowment policies

If your policy renewal due date of payment falls on or after September 22, 2025, your premium will be exempt from GST benefit. For policies renewed with a due date of payment before this date, the previous GST rate of 18% still applies.

For new policies purchased on or after September 22, 2025, the premium will not include any GST. This makes coverage cheaper from day one and increases the effective value of every rupee you pay.

No. Group insurance policies, such as those provided by employers, continue to attract 18% GST. The exemption applies only to individual life and health insurance policies purchased personally or for family members.

Yes, all riders attached to an Individual life insurance policy Riders and add-ons will also be exempt from GST.

The GST change only affects premiums, not maturity benefits. The amount you receive at policy maturity, or the insurance payout, remains unchanged. However, paying NIL GST allows more of your premium to go toward coverage or investment, indirectly improving returns for ULIPs and endowment plans.

The change is not retrospective. Any GST paid on premiums before September 22, 2025, remains as is. The benefit applies only to renewal premiums due date of payment on or after the effective date.

For ULIPs and endowment plans, exempting GST means a larger portion of your premium goes into the investment fund or savings component. Over time, this leads to higher fund accumulation, enhanced returns, and more effective wealth creation, while still providing insurance protection.

The 0% GST rate is expected to apply to premiums charged on or after 22 September 2025, subject to the final government notification. Applicability to renewals will depend on the wording of the notification.

Generally, GST is charged based on the date the premium is due or paid. If the renewal premium is payable after 22 September 2025, it may qualify for 0% GST.

As of now, the proposal appears focused on individual life insurance policies. Group or employer-sponsored cover may continue to attract GST unless explicitly included in the final notification.

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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