GST on Health Insurance Premiums: In a much-anticipated move, the central government is considering a proposal to reduce the GST on health and term insurance premiums from the current 18% to just 5%. This landmark decision could be finalized in the upcoming GST Council meeting, expected before the Monsoon Session of Parliament 2025. If implemented, the reduction in GST will significantly ease the financial burden on millions of Indians, especially senior and super senior citizens, who often struggle with the high costs of insurance due to tax levies.
Currently, insurance products including health and term life insurance are taxed at a flat 18% GST rate, making them less accessible for vulnerable and retired populations. This cost barrier often discourages policy uptake, leaving many without essential financial and healthcare protection. Reducing the GST to 5% or removing it altogether is expected to boost insurance penetration, support long-term financial planning, and help the government achieve its goal of universal insurance coverage.
A report submitted to the GST Council in December 2024, along with inputs from the Insurance Regulatory and Development Authority of India (IRDAI), recommends GST exemption on life insurance premiums, especially for policies with claim amounts up to ₹5 lakh. The projected revenue loss of ₹2,600 crore from the proposed changes is seen as a reasonable trade-off for broader insurance adoption and public welfare enhancement. A smaller ₹200 crore loss is expected from potential GST exemptions on term deposits.
Who Can Apply for GST-Reduced Health Insurance?
Anyone who purchases health insurance or term life insurance policies can benefit from this proposed GST reduction, including:
- Senior citizens (age 60+)
- Super senior citizens (age 80+)
- Salaried individuals
- Self-employed professionals
- Families buying family floater insurance plans
- Policyholders renewing or buying new insurance
This initiative is not limited to a specific income group, making it universally applicable if passed. Both individual and group policyholders can expect cost relief from this reform.
Insurance Fees Before & After GST Cut
| Policy Type | Current Premium with 18% GST | Proposed Premium with 5% GST |
|---|---|---|
| Individual Health Plan (₹10,000 base) | ₹11,800 | ₹10,500 |
| Senior Citizen Plan (₹20,000 base) | ₹23,600 | ₹21,000 |
| Term Insurance Plan (₹8,000 base) | ₹9,440 | ₹8,400 |
The above examples show that a GST cut from 18% to 5% can reduce the overall insurance cost by 10–13%, making policies more affordable and accessible to all.
How to Use the Reduced-GST Insurance Benefit
- Check Premium Breakdown: Ensure your insurance provider updates the premium amount reflecting the revised GST.
- Compare Plans: Once the new rates are live, compare across providers to get the best value.
- Utilize Government Portals: Use platforms like PMJAY, NHA, or IRDAI for affordable plans.
- Look for Senior Citizen Plans: Take advantage of plans tailored for 60+ or 80+ citizens.
- Renew Early: If the GST reduction is passed, renew your policy post-implementation to benefit.
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How to Apply for Health Insurance
Applying for health insurance remains simple and can be done via:
Online Method:
- Visit insurance provider’s website.
- Select health or term insurance.
- Enter basic details (age, income, pre-existing conditions).
- Choose coverage amount and term.
- Make payment online using updated GST rate. GST Council Portal
Offline Method:
- Visit the branch of your preferred insurance company.
- Consult with an agent or advisor.
- Fill out a physical application form.
- Submit necessary documents (ID proof, medical reports).
- Pay premium through cheque, UPI, or bank transfer.
Important Dates to Remember
| Event | Tentative Date |
|---|---|
| GST Council Meeting | June 2025 (Pre-Monsoon) |
| Parliament Monsoon Session Start | Mid-July 2025 |
| Likely Implementation (if passed) | August–September 2025 |
Disclaimer
The information provided in this article is based on current reports and government discussions as of June 2025. The GST reduction is not yet officially implemented. Policyholders are advised to wait for official confirmation from the GST Council and IRDAI before expecting a change in their premium amounts. Always consult with your insurance provider or financial advisor for updates.
GST on Health Insurance Premiums Conclusion
The potential reduction in GST on health and term insurance premiums is a progressive policy move that aims to expand insurance accessibility across India. If enacted, it will directly benefit middle-class families, senior citizens, and financially vulnerable groups who struggle with high healthcare costs.
Health insurance is often a critical need, especially in a country where out-of-pocket healthcare expenses remain high. By slashing the GST to 5%, the government can encourage a larger share of the population to opt for coverage, thereby promoting overall wellness and economic stability.
This policy is also aligned with India’s broader goals of financial inclusion and universal health protection, including efforts like Ayushman Bharat. As we await a final decision in the upcoming GST Council meeting, insurers and customers alike are hopeful for a favorable outcome.
Ultimately, a lower GST will act as an incentive for policyholders to continue their coverage, reduce policy lapses, and foster long-term financial planning. This could be a game-changer for India’s under-insured population and a step towards a healthier, more secure future
GST on Health Insurance Premiums FAQs
1. Will all types of insurance policies get the GST reduction?
The proposed GST reduction primarily targets health insurance and term life insurance policies. However, a recommendation also exists for removing GST from life insurance policies with claims up to ₹5 lakh. General insurance (e.g., car or property insurance) may not be included.
2. When will the GST cut on insurance come into effect?
If approved during the GST Council meeting before the 2025 Monsoon Session, the implementation could happen as early as August–September 2025. Until then, the 18% GST remains applicable on all policies.
3. How will this change affect senior citizens the most?
Senior and super senior citizens (60–80+ age group) often face high insurance premiums due to medical risks. A GST reduction from 18% to 5% can reduce their premiums by up to 13%, significantly improving affordability and encouraging them to stay insured longer.
4. Will new policies only benefit from the GST cut or existing ones too?
If the policy is renewed after the new GST rate is effective, existing policyholders will benefit too. New customers applying after the change will automatically receive premiums with the lower GST applied.
5. What should policyholders do now?
Policyholders should monitor updates from the GST Council and IRDAI. If your policy is up for renewal soon, consider waiting until the GST cut is officially implemented, if possible. Stay informed through official channels and insurance providers.
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