GST on Life Insurance in India: 0% from 22 September 2025

GST on Life Insurance in India: 0% from 22 September 2025

From September 22, 2025, life insurance in India becomes more affordable as the Goods and Services Tax (GST) on premiums is reduced from 18% to 0%.

This change means you now pay only the actual premium—no extra tax added. For example, a ₹20,000 annual policy that earlier cost ₹23,600 with GST will now cost exactly ₹20,000. That’s a saving of ₹3,600 every year, money that can stay with your family or be invested elsewhere.

What is GST and Its Evolution in Life Insurance?

The Goods and Services Tax (GST) is India’s indirect tax, introduced on July 1, 2017, to replace service tax and other levies. Its purpose was to create a single, transparent system, but in the case of life insurance, it also added an extra cost for policyholders.

From September 22, 2025, onwards

• GST on all individual life insurance policies is now 0%.
• Policyholders pay only the base premium, with no extra tax.
• This will reduce their effective outgo
• For investment products it will increase their return on investment

This journey from 15% service tax to 18% GST and finally to zero—shows how life insurance has shifted from being a taxed expense to a more accessible financial protection tool for every individual and their loved ones.

GST Rates by Policy Type: Term, ULIP, Endowment, Riders

Before this change, GST rates on life insurance varied by product type. While the standard rate was 18%, the way it was applied to different policies sometimes needed additional focus for understanding it clearly. Here’s a quick breakdown of how GST worked till September 21, 2025, compared to how it would function from September 22, 2025:

Why this matters?

Earlier, even a small rider or add-on pushed up the policy cost because of GST. Now, with 0% GST across all categories, individual life insurance products are simpler, more transparent, and easier to plan for. Every rupee you pay goes fully into protecting your family or building long-term savings—without a tax layer eating into it.

Implementation of 0% GST: What Changes on September 22, 2025?

From September 22, 2025, all new and renewal premiums for individual life insurance policies in India will be charged at 0% GST.

This means the tax element that earlier inflated your premium is wholly removed. Policyholders will see the difference directly in their payment receipts, and only the base premium will be debited, with no additional tax line item.

For those with policies renewing after this date, the revised rate without GST will apply automatically, without any action required. No need to discontinue or surrender your existing policies to get benefit of GST exemption.

New buyers will also benefit from simplified pricing, making it easier to compare plans without worrying about tax add-ons. In short, premiums become more transparent, predictable, and affordable.

Affected Policy Types & Exemptions

Not every insurance product is treated equally under the new rule. Here’s a quick look at what gets the 0% GST benefit and what doesn’t:

Covered under 0% GST (from September 22, 2025): Individual Life Insurance policies

• Term Insurance – pure protection plans
• ULIPs – charges like mortality, admin, fund management
• Endowment & Money-Back Plans – savings + protection combos
• Riders/Add-ons – critical illness, accident, waiver of premium

Not covered / Still subject to GST : Group policies

• Group insurance policies (employer-provided)
• Corporate insurance products

This clarity helps policyholders know exactly where they’ll save, and where taxes may still apply.

Rationale Behind the Reform

This change aims to encourage higher insurance penetration, especially among lower and middle-class families who often delay or underinsure due to higher cost burden .

The reform also aligns with the broader vision of Insurance for all by 2047 ensuring that life insurance is treated not as a luxury but as an essential safeguard for every Indian family.

How Much You Save: Premium Calculations Before & After GST

The removal of GST translates into direct annual savings for policyholders. Here are simple case examples:

Case Example 1

Ramesh, 35, pays ₹20,000 annually for term insurance. Earlier, he paid ₹23,600 after GST. Now, he pays only ₹20,000, saving ₹3,600 each year.

Case Example 2

Sunita invests ₹50,000 annually in an endowment plan. Earlier, the outgo was ₹51,125 ( 2.25% from 2nd year & onwards). From Sept 22, she saves ₹1,125 annually. In case she was required to pay this renewal premium for next 10 years, her saving would be Rs. 11,250/-. This additional savings can be redirected towards investments or fulfil her aspirations.

This reform puts money back in policyholders’ hands while encouraging wider adoption of insurance.

NRI Considerations for GST on Life Insurance

For Non-Resident Indians (NRIs), the GST waiver also brings clarity and relief. Earlier, NRIs purchasing life insurance in India were subject to GST at 18% unless the premiums were paid from an NRE (Non-Resident External) account in a foreign currency with foreign address which allowed for a tax waiver.

As of September 22, 2025, GST on individual life insurance premiums is set at 0%, regardless of the payment method. This means those paying from domestic savings accounts can also enjoy the benefit.

This ensures a level playing field for NRIs and residents, making India’s life insurance offerings more attractive globally.

Practical Tips: When to Buy or Renew Your Policy

To maximize the benefits of the 0% GST reform, keep these practical tips in mind:

• Check Renewal Dates – If your premium is due before September 22, 2025, paying after this date ensures the GST waiver applies.
• New Buyers – Your wait will be over on September 21, 2025. Rush to Aviva India online (link of website) or our branch officer near you or our agent to buy policy at old premium rates without GST on September 22, 2025 to lock the maximum savings.
• Avoid Policy Lapse – Don’t delay payments beyond September 21, 2025; protection should remain continuous. Ensure that you pay your premium on September 22, 2025 or get your lapsed policy reinstated because in insurance its ok to be 5 years early but delay of 1 day can be costly
• Reinvest Your Savings – Use the money saved from the GST waiver to buy riders, boost coverage, or invest in savings plan. Don’t lose the benefit of compounding even for a day. We at Aviva are here to help you.
• Plan Long-Term – Lower premiums improve affordability, but coverage adequacy should remain the priority. September 22, 2025 has ended your wait

By timing your payments wisely, you can enjoy all ie cost savings, uninterrupted protection & higher returns on your investments.

Broader Context: Insurance Penetration & Global Perspective

India’s insurance penetration has historically lagged global averages. In 2024, life insurance penetration accounted for approximately 3% of GDP, compared to a global average of over 6%. High premiums due to GST costs were often cited as barriers.

By removing GST on life insurance, we’re one step closer to our collective mission of “Insurance for all by 2047” which aims to bring policies within the reach of more households, across the length & breadth of India.

In the long run, the move could significantly improve India’s insurance coverage ratios, bridging the gap with global peers while building a stronger financial safety net for millions of families.

Still have questions? Check out our Frequently Asked Questions (FAQs) for more details.

AN Sep 74/25