GST on Term Insurance

GST is an indirect tax that is charged on insurance as well as other goods and services. In term insurance plans, GST is levied on the premiums paid by the insured. It came into effect in 2017, replacing the previous service tax on insurance premiums, introducing uniform taxation across all financial products.

However, from 22nd September 2025, the GST on term life insurance premiums has been removed for individual plans. It is a government initiative to encourage people to protect their families and themselves. This reform makes term insurance more affordable and encourages individuals to seek pure life insurance protection for their families.

In 2026, individual term insurance policies are not subject to GST. However, if you are insured with group term insurance, you will have to pay an 18% GST on your term insurance premium. Therefore, individuals buying an individual term plan or renewing their existing plan can pay a GST-free premium.

Here is the present GST rate on term insurance policies:

To understand the real impact of this reform, it’s important to compare premiums before and after GST removal. Earlier, an 18% GST was added to the base premium, increasing the overall cost.

With GST now reduced to 0%, policyholders pay only the actual premium, resulting in direct savings every year.

Here’s a quick comparison:

As per the 56th Council meeting in September 2025, GST charges have been removed from individual life insurance and health insurance policies, family floater and senior citizen health insurance plans, etc. This initiative has been taken to make specific insurance policies affordable to individuals, promoting social welfare.

Here are the GST rates on different types of insurance policies before September 2025 and after the reform:

In India, taxation of term insurance has evolved in several phases, reflecting shifting priorities within the regulatory system and the need for financial protection for citizens. The taxation timeline from service tax to GST and the reformation of 0% GST on term insurance policies are outlined below:

Just like residents can save on the 18% GST from 22nd September 2025 onwards, NRIs (Non-Resident Indians) can also claim a GST refund to reduce their tax liabilities.

However, the GST refund is applicable only when the insured NRI meet some specific requirements. Here are some of the criteria that an NRI must meet to avail a GST refund on term insurance premiums:

• NRI term plan must be bought for the NRIs themselves or their families in India.
• Non-Resident External Bank Account (NRE) must be used to buy term insurance from an Indian insurance company. Also, the policy will be issued to NRI’s foreign resident.
• The insurance company from which an NRI purchases the term insurance policy should have GST registration.
• Transactions for term insurance premiums should comply with the GST regulations.
• NRIs can claim a GST refund within the same month or year they have paid the term insurance premium.
• The NRI policyholder might be required to provide a TRC (Tax Residency Certificate) to claim a GST refund.

Note: TRC is a government-issued official document where the assessee can claim to be a country’s resident. If a non-resident wants to receive tax relief, they must present a tax residency certificate (TRC) that identifies their nation of residence from their home country. Indian citizens can benefit from tax reduction under the Double Tax Avoidance Agreement (DTAA) by obtaining a tax residency certificate.

• The NRI should also provide their international address proof, such as a driver’s licence, utility bills, bank statement, or government ID card.
• KYC documents for the NRI, including PAN card, passport, recent photograph, the last 6 months’ NRE account statements (proof of premium payment), etc., should also be produced..

As per CBIC, if you are insured with a term insurance policy, you cannot claim ITC (input tax credit) for GST paid for individual term insurance plans. The Central Board of Indirect Taxes and Customs (CBIC) imposed this rule from September 2025 under Section 17(5) of the CGST Act of 2017.

As per CBIC, brokerage, commission, and any other expenses related to the input services for individual term insurance policies are no longer eligible for input tax credit. Therefore, insurance companies will have to bear the taxes already paid regarding these insurance-related inputs.

However, this exemption is applicable for individual term insurance plans only. Group insurance plans can still claim input tax credit on GST. For example, self-employed people or business owners who pay for their employees' term plans can fully claim ITC on the 18% GST and include it in their regular GST returns.

This difference shows that the policy was carefully thought out, where individual retail plans are not taxed (0% GST, no ITC) so that end consumers can benefit directly, while corporate/group plans are taxed so that the ITC can be passed through.

Term insurance policyholders can avail multiple tax benefits as per the Income Tax Act. When purchasing a term insurance plan, an insured should understand the tax implications to avail the necessary benefits on their income tax amount.

You can avail tax benefits on term insurance under sections 80C (123 of the IT Act 2025), 80D (126 of the IT Act 2025), and 10(10D) (11 of the IT Act 2025).

Here are the detailed exemptions under each section: