GST Rates on Term Insurance in India: What You Need to Know
Understand the current GST rate on term insurance, how the 2025 GST change affects individual and group policies, and what it means for your premium.
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When you buy term insurance, you usually look at the premium first.But you may also notice another amount added to the premium. That amount is GST.For a long time, term insurance premiums were charged with 18% GST. But this has changed.From 22 September 2025, GST on individual life insurance policies was reduced from 18% to 0%. This includes individual term insurance policies. Group term insurance and group credit-life insurance are different and continue to attract 18% GST.So, if you are planning to buy a term plan today, how does GST affect you?Let's understand it in simple terms.
What Is GST?
GST stands for Goods and Services Tax.It is a tax charged on many goods and services in India. Insurance is a service, so GST was earlier charged on insurance premiums.For example, imagine your term insurance premium was ₹10,000.Before the GST change:Premium: ₹10,000GST at 18%: ₹1,800Total: ₹11,800This meant you paid ₹1,800 extra as GST.But for eligible individual life insurance policies from 22 September 2025, this additional GST is no longer charged.What Is the GST Rate on Term Insurance Now?
For an individual term insurance policy, the GST rate is currently 0%.This means that an eligible individual term insurance policy does not have the earlier 18% GST added to the premium.This change applies to individual life insurance policies from 22 September 2025.However, there is an important difference between individual and group insurance.Individual Term Insurance
If you buy a term insurance policy for yourself from an insurer, it is an individual life insurance policy.The GST rate on such policies is currently 0%.Group Term Insurance
Group insurance works differently.For example, your employer may provide you with life insurance as part of your employee benefits.This is usually a group insurance arrangement.The GST exemption does not apply to group term insurance. Group term and group credit-life policies continue to attract 18% GST.So, do not assume that every term insurance policy has 0% GST.The type of policy matters.Why Was GST on Term Insurance Removed?
The GST change was introduced as part of the government's decision to make individual life and health insurance more affordable.The Department of Financial Services states that GST on all individual life insurance policies was reduced from 18% to zero with effect from 22 September 2025.For someone buying an individual term plan, this means the premium does not have the additional 18% GST that applied earlier.Does 0% GST Mean Term Insurance Has Become Cheaper?
It can reduce the amount you pay compared with the earlier tax treatment.But your final premium still depends on several things.For example:- Your age
- The amount of life cover you choose
- Policy term
- Health
- Smoking or tobacco use
- Occupation
- The insurer's underwriting
What Happens to GST When You Pay Premiums in Instalments?
This is important if you pay your premium monthly, quarterly or through another instalment option.The GST treatment depends on when the instalment is paid.According to the Department of Financial Services, instalments paid before 22 September 2025 were subject to the earlier 18% GST rate. Instalments paid on or after 22 September 2025 are exempt for eligible individual policies.So, if you have an older policy and are still paying premiums in instalments, the payment date matters.What About Term Insurance Bought Before September 2025?
If you bought a term insurance policy before the GST change, the policy does not automatically become a new policy.The important point is the GST treatment of the premium being paid.For instalment-based premiums, the government has clarified that the GST rate is based on the date of the premium payment.This means the old 18% GST and the new 0% GST can apply to different instalments depending on when they were paid.Does GST Affect the Life Cover?
No.GST and your life cover are two different things.Suppose your term insurance policy has a life cover of ₹1 crore.The GST change does not turn that into ₹90 lakh or ₹95 lakh.Your ₹1 crore cover remains the amount specified under your policy, subject to the policy terms.GST only affects the tax charged on the insurance premium.What About Riders?
A term insurance plan may come with additional benefits called riders.Some common examples include:- Critical illness rider
- Accidental death rider
- Disability-related rider
- Premium waiver rider
A Simple Example
Let's say you are buying an individual term insurance policy.Your annual premium is:₹12,000Under the current GST exemption:Premium: ₹12,000GST: ₹0Total: ₹12,000Earlier, if 18% GST had applied:Premium: ₹12,000GST: ₹2,160Total: ₹14,160The actual premium quoted by the insurer can be different based on your personal details and underwriting.But the GST component is what has changed.Does GST Apply to Employer-Provided Term Insurance?
If your employer provides you with a group life or group term insurance policy, the treatment is different.The government has specifically clarified that employer-sponsored group life insurance continues to attract 18% GST.This is why it is important to know whether your insurance is an individual policy or a group policy.Things to Remember
If you are buying term insurance, remember these points:- Individual term insurance currently has 0% GST.
- The change came into effect on 22 September 2025.
- Group term insurance continues to attract 18% GST.
- Group credit-life insurance also continues to attract 18% GST.
- GST does not reduce your life cover.
- The premium can still vary based on your age, health, cover amount and other factors.
- If you pay premiums in instalments, the payment date can affect the GST treatment.
Final Word
The GST rules for term insurance have changed, and this is important if you are planning to buy a policy.If you are buying an individual term insurance plan today, you generally do not have to pay the earlier 18% GST on the premium.But group insurance works differently.So, before looking only at the final premium, check what type of policy you are buying and what is included in the premium.A simple look at the premium breakup can tell you exactly what you are paying for.Frequently Asked Questions
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