GST on Term Insurance Premiums

From September 22, 2025, GST on term insurance premiums has been reduced from 18% to 0%. This reform means that policyholders will no longer pay any indirect tax on their life cover, making term plans more affordable than ever before. The move is a part of India’s new GST structure, which aims to simplify taxation and provide direct relief to families. With GST on term insurance premiums now at zero, more individuals can ensure the financial protection for households across income groups.

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What is GST on Term Insurance Premiums?

GST, or Goods and Services Tax, is an indirect tax levied on the supply of goods and services in India. Since its introduction in 2017, GST has been applicable to various financial services, including life and health insurance. In the case of term insurance, insurers charged GST on term insurance premium paid by policyholders, which increased the total cost of maintaining coverage.

For example, if your annual term insurance premium is ₹10,000, you previously paid ₹1,800 extra as term life insurance GST, taking your total cost to ₹11,800. With GST on term insurance premiums now reduced to 0%, you only pay the base premium of ₹10,000. Over the policy term of a 20-year policy, this could mean a direct saving of ₹36,000, making long-term protection considerably more affordable for policyholders.

Term Plans

₹1
Crore

Life Cover

@ Starting from ₹ 13/day⁺

₹50
LAKH

Life Cover

@ Starting from ₹ 8/day⁺

₹75
LAKH

Life Cover

@ Starting from ₹ 12/day⁺

Why Was GST Removed from Term Insurance Premiums?

The government’s decision to remove GST on term insurance premiums was driven by several important reasons:

It aims to make individual life insurance more affordable for families across different income groups by lowering the overall cost of premiums.
The reform is intended to encourage wider adoption of insurance in India, where penetration levels are still significantly below global averages.
It aligns with the broader national objective of financial inclusion and ensuring long-term social security for households.
By eliminating term insurance GST rate on premium, the government seeks to reduce the financial burden on policyholders, particularly at a time when household expenses are steadily rising.
The move is also expected to boost trust and awareness around term insurance, motivating more individuals to safeguard their family’s future through adequate coverage.

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What is the Impact of GST Removal on Common Man?

The removal of term insurance GST is a people-centric reform that helps the common man by making financial protection clearer, simpler, and more inclusive for every household:

Greater Affordability: With reduced costs, families across income groups can opt for higher cover amounts without worrying about extra tax expenses in the form of term insurance GST.
Encouragement for First-Time Buyers: Lower premiums make it easier for individuals purchasing insurance for the first time to secure adequate financial protection.
Long-Term Savings: For long-duration policies, the cumulative savings over the years become significant, adding more value to the investment.
Improved Financial Planning: The money saved from term insurance GST removal can be directed towards other essential goals such as children’s education, healthcare, or long-term investments.

What Does This Mean for the Life Insurance Industry?

While policyholders benefit directly, insurers face some challenges due to the loss of input tax credit. However, industry experts believe the reform will expand the market by attracting more customers, which will balance out the initial impact. In the long run, the removal of term insurance GST is expected to increase insurance penetration in India, making the sector more robust and customer-centric.

Wrapping it Up!

The removal of GST on term insurance premiums is a welcome step that makes financial protection more accessible and affordable. Families now pay only the actual premium without additional tax, helping them secure higher coverage at the same cost. This reform not only reduces the burden on existing policyholders but also encourages more people to adopt term insurance as a vital tool for safeguarding their family’s future.

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FAQs

Q: Is Term Insurance GST Free Now?

Ans: Yes, GST on term insurance is free now. The GST Council has announced a full exemption on all individual life insurance policies, including term life, ULIP, and endowment policies. This new rule will be effective from September 22, 2025.
Q: What is the GST Rate for Term Insurance?

Ans: The term insurance gst rate on premiums has been reduced from the previous 18% to 0%. This change is a significant relief for policyholders and is aimed at making insurance more affordable.
Q: How Does the GST Change Affect My Term Insurance Policy?

Ans: This change directly reduces the cost of your term insurance premium. For example, if your annual premium was ₹10,000, you will no longer have to pay the additional ₹1,800 as term life insurance GST. This makes the total cost of your policy significantly lower. The benefit will apply to new policies and renewals that occur on or after September 22, 2025.
Q: Will I Get a Refund if I Paid My Premium in Advance with GST?

Ans: No, if you have already paid your premium in advance, including the 18% term insurance GST rate, you will not receive a refund. The tax is collected at the time of the transaction, and the new rule applies only to premiums paid on or after the effective date.

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˜The insurers/plans mentioned are arranged in order of highest to lowest Sum Assured(SA) offered by Policybazaar’s insurer partners offering term insurance plans on our platform, as per ‘first year premium of life insurers as at 31.03.2025 report’ published by IRDAI.

Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. For complete list of insurers in India refer to the IRDAI website www.irdai.gov.in

Rs. 400/month is starting price for a 1 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

Rs. 400/month (Rs.13/day) is starting price for a 1 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 230 is starting price for a 50 lakhs term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

+Rs. 8/day is starting price for a 50 lakhs term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

+Rs. 12/day is starting price for a 75 lakhs term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

+Rs. 497/month is starting price for a 1.5 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 487/month is starting price for a 2 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 626/month is starting price for a 3 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 905/month is starting price for a 5 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 1,267/month is starting price for a 7 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

*The full refund of premium is available on availing the one-time option of refund of premium. Total premium paid for policy (paid for add-ons) will be the special exit value, payable on availing the one-time option of refund of premium if you wish to completely exit the policy.

+Rs. 447/month is starting price for a 1 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs.679/month is starting price for a 2 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 910/month is starting price for a 3 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 1,374/month is starting price for a 5 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 1,924month is starting price for a 7 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

Women

+Rs. 400/month is Starting price for a 1 crore term life insurance for an 18 year-old Female, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

Rs. 461/month is the starting price for a 1 crore term life insurance for an 24 year-old female, non-smoker, with no pre-existing diseases, cover upto 54 years of age.

1,642/month is the starting price for a 1 crore term life insurance for an 44 year-old female, non-smoker, with no pre-existing diseases, cover upto 74 years of age.

Prices offered by the insurer are as per the approved insurance plans | #All savings and online discounts are provided by insurers as per IRDAI approved insurance plans | Standard Terms and Conditions Apply | **Tax Benefits are subject to changes in tax laws.| Policybazaar Insurance Brokers Private Limited

We will respond in the first instance within 30 minutes of the customers contacting us. 30-minute claim support service is for the purpose of giving reasonable assistance to the policyholder in pursuance of the claim. Settlement of claim (including cashless claim) is the responsibility of the insurer as per policy terms and conditions. The 30-minute claim support is subject to our operations not being impacted by a system failure or force majeure event or for reasons beyond our control. For further details, 24x7 Claims Support Helpline can be reached out at 1800-258-5881

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Policybazaar Insurance Brokers Private Limited | CIN: U74999HR2014PTC053454 | Registered Office - Plot No.119, Sector - 44, Gurgaon, Haryana – 122001 | Registration No. 742, Valid till 09/06/2027, License category- Composite Broker Visitors are hereby informed that their information submitted on the website may be shared with insurers. Product information is authentic and solely based on the information received from the insurers.

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