If you pay for your own health or life cover, the tax on it has gone. If your cover comes through your employer, nothing changed. That single distinction explains most of the confusion about what happened to insurance premiums in September 2025.
What was actually exempted
The Department of Financial Services, in the Ministry of Finance, states the position plainly: GST on all Individual Life Insurance and Individual Health Insurance policies, including reinsurance of the same, has been reduced from 18% to zero, with effect from 22 September 2025.
The scope is wide within that boundary:
- Individual life — all individual life policies, whether term, ULIP or endowment.
- Individual health — all individual health policies, including family floater plans and policies for senior citizens.
- Reinsurance of either.
The change followed the recommendations of the 56th meeting of the GST Council, and was given effect by notification under the GST rate schedule with effect from 22 September 2025.
What was not
Here is the line that catches people, stated by the Department of Financial Services in as many words: the exemption is explicitly for individual life and health insurance policies, and the 18% GST rate will be applicable on group insurance policies.
That includes:
| Policy | GST |
|---|---|
| Your own health policy | Nil |
| Your own term, ULIP or endowment policy | Nil |
| Employer-sponsored group health insurance | 18% |
| Employer-sponsored group life policy | 18% |
| Group term policies | 18% |
| Group credit life, typically sold with a loan | 18% |
Group credit life is the one worth pausing on, because it is bought by people who are not thinking about insurance at all. It is the cover attached to a home or personal loan, often folded into the sanctioned amount — and the Department of Financial Services names it directly: group credit life and group term policies would continue attracting 18% GST.
The group exclusion also means the household with employer cover and no individual policy received nothing from this change. If anything it widened the gap between the two, which is a reason to look again at whether the employer policy is the whole of your protection.
The date that decides your rate is the date you paid
The timing rules are more generous than people assume, and they turn on payment rather than on the due date.
GST applies as on the date of premium payment. So a premium that fell due on 21 September 2025 but was received on or after 22 September attracts no GST at all.
The same test runs through the other timing cases the Department of Financial Services addresses:
- Instalments. Each instalment is judged on its own payment date. Paid before 22 September, 18%. Paid on or after, exempt.
- Advance premium. Where an advance was paid before 22 September for a premium due afterwards, the position is settled by which side of the date the events fall on: when two of the three events fall on or after 22 September 2025, the exemption applies; when two of them fall before, the old rate does.
- A lapsed policy revived. Premiums paid on a policy reinstated on or after 22 September 2025 are exempt.
- Policies issued to NRI customers. Where the policy meets the conditions to qualify as export of services, it can continue to be treated as export. Otherwise it is treated as exempt.
Bundled covers, and the single-price test
A common product question with a clear answer. Where an individual health insurance policy carries additional features such as travel cover and personal accident cover, and is sold as a single product for a single price, the entire product is exempt.
The operative words are "single product" and "single price". A separate standalone policy is a separate supply, and the exemption as described covers individual life and individual health.
Why your premium may not fall by 18%
This is the part that generates complaints, and it is worth understanding rather than resenting.
Look at how the GST Council recorded the change: the entry for individual health and individual life insurance moved from "18% with ITC" to "Exemption". Those are not the same kind of zero.
Under GST, a taxable supply lets the supplier claim credit for the tax it pays on its own inputs — commissions, technology, services, marketing. An exempt supply does not. So on 22 September 2025 an insurer stopped charging 18% on the premium and, in the same moment, stopped being able to recover the tax embedded in its own costs. That input tax turns into a cost of doing business.
The consequence is arithmetic, not bad faith: a premium that was ₹11,800 including 18% GST on a base of ₹10,000 does not automatically become ₹10,000. It becomes ₹10,000 plus whatever the insurer now absorbs of its own unrecoverable input tax, minus whatever competition forces it to give up.
The Department of Financial Services has pressed insurers on this, with the Secretary underlining the importance of ensuring the benefit is fully passed on to existing and prospective policyholders. Whether it lands in full is something you can check yourself on a renewal notice, by comparing the base premium with last year's rather than the total.
What it does to your Section 80D deduction
A quieter consequence, and one to get right before filing.
Section 80D, as the Income Tax Department sets it out, allows a deduction for health insurance premium paid. If the premium paid falls, the deduction falls with it — you cannot claim relief on tax you were not charged. A household that was claiming the full ₹25,000 on a premium of ₹25,000 including GST will find the deductible figure smaller once the GST component is gone.
That is not a loss. Paying less is better than deducting more, at every slab. But it changes the number you put on the form, and it changes the arithmetic in anything you were told about "effective cost after tax benefit".
It also only matters at all if you are in the old regime. Section 80D is a Chapter VI-A deduction and is not available under the new regime, which is the default — the detail is in the guide to Section 80D and the allowance for parents, and the regime comparison is in old regime versus new, with the numbers.
What to actually check
- Is your policy individual or group? Everything follows from that one word on the schedule.
- Compare base premium with base premium on your renewal notice, not total with total.
- Check the loan cover. Group credit life bundled into a home or personal loan still carries 18%.
- Check the date on an instalment that straddled 22 September 2025 — the rate followed the payment, not the due date.
- Recalculate your 80D figure if you are in the old regime. The premium paid is the number, and it moved.
This article describes the GST treatment of insurance premiums published by the Department of Financial Services and the GST Council. It is general information for an Indian audience, not tax, insurance or financial advice, and it is not a recommendation to buy or cancel any policy. The rate applying to a specific product, and the effect on a specific premium, depend on the contract and the insurer. Confirm with your insurer or a qualified tax adviser before relying on any of this.
Sources
- Department of Financial Services — Exemption of GST on all individual life insurance and health insurance policies (opens in a new tab)
- Department of Financial Services — GST exemption FAQs (opens in a new tab)
- GST Council — Recommendations of the 56th meeting of the GST Council (opens in a new tab)
- GST Council — CGST rate notifications (opens in a new tab)
- CBIC — Tax information portal, notifications (opens in a new tab)
This article is general information for an Indian audience and reflects the GST position on insurance premiums published by the Department of Financial Services and the GST Council at the date of review. It is not tax, insurance or financial advice. Rates, notifications and product classifications change, and the treatment of a particular policy depends on how it is written and sold. Confirm the current position with your insurer, the CBIC notifications or a qualified tax adviser before relying on any of this. Last reviewed 16 September 2026.
