India is on the brink of a significant shift in the tax treatment of insurance premiums, as the GST Council considers removing GST on term life and senior citizen health insurance premiums. According to a Moneycontrol report, the Council is likely to take up the proposal in its next meeting, following recommendations from a panel of ministers.
Currently, both term life insurance and health insurance premiums attract an 18% Goods and Services Tax. If approved, the exemption would apply to:
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Term life insurance premiums for all policyholders, regardless of age.
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Health insurance premiums for senior citizens (above 60), with no cap on the sum insured.
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Health insurance policies for others, if the sum insured is up to ₹5 lakh.
A meaningful cost advantage
For example, a senior citizen paying ₹50,000 annually for health insurance now pays an additional ₹9,000 in GST. Removing the tax could save thousands of rupees for individuals, making insurance more affordable and encouraging wider adoption — especially among the elderly and middle-income groups.
The government estimates that removing GST on these policies would cost about ₹2,600 crore annually in revenue—₹2,400 crore from health insurance and ₹200 crore from term life insurance. The Council is reportedly exploring ways to offset this by adjusting other GST slabs.
Why now?
Insurance premiums in India have risen sharply—by as much as 20–25% in recent years—while penetration remains low. Less than 40% of Indians have health insurance, and life insurance penetration is below 4%. The exemption is also aligned with the IRDAI’s push to treat insurance as a public good, rather than a luxury.
What happens next?
The proposal has been submitted by the Group of Ministers and is expected to be tabled at the next GST Council meeting, likely before the upcoming Parliament session. If approved, the change could take effect in the coming months after formal notification.
FAQs
Will all term life insurance premiums be GST-free?
Yes, the exemption is proposed for all term life insurance policies, irrespective of age or sum assured.
Is the health insurance GST exemption only for senior citizens?
The full exemption applies to senior citizens. For others, policies up to ₹5 lakh sum insured may also qualify for GST-free treatment.
How much can policyholders save?
For a ₹30,000 health premium, the GST of ₹5,400 would no longer apply. Higher premiums would result in even greater savings.
If approved, this move would mark a long-awaited change, making essential protection more accessible and affordable to millions of Indians.
