GST on Term Insurance

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GST on Term Insurance is 0% for individual term insurance policies from 22 September 2025, following the latest GST reforms approved by the GST Council. Earlier, the term plan GST rate was 18%, which increased the overall premium cost for policyholders. This exemption now applies to pure protection policies, life cover plans, and long-term risk-only insurance products purchased by individuals. You encounter this life cover GST when buying a new policy, renewing coverage, or adding riders. Removing GST on term insurance reduces policy premium tax burden and makes life protection plans more affordable for families and working professionals.

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GST Rate on Term Insurance at a Glance

The GST structure for term insurance changed significantly after GST 2.0 reforms.
This updated insurance premium GST structure lowers the cost of long-term financial protection.
GST on term insurance premium: 0%
Term plan GST rate for individual policies: 0%
GST on risk-only plans: 0%
GST on guaranteed term plans: 0%
Group or employer-provided term insurance: 18% GST may apply
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Rate by Term Insurance Type: Quick Reference

  1. Policy Type

    1. Individual term insurance
    2. Pure risk-only plans
    3. Guaranteed payout term plans
    4. Group/corporate term insurance

  2. GST Rate

    1. 0%
    2. 0%
    3. 0%
    4. 18%

  3. What It Means for You

    1. No GST added to premium
    2. Lower long-term protection cost
    3. Tax-free premium structure
    4. GST applicable for employer-provided cover
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What the Rate Means for Your Premium Cost

GST removal directly lowers your insurance cost.

Earlier:

₹20,000 premium + 18% GST = ₹23,600 total

Now:

₹20,000 premium = ₹20,000 payable

This significantly reduces policyholder GST burden and improves affordability for long-term cover GST products.

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GST on Term Insurance Riders and Add-ons

GST treatment depends on whether riders are bundled with the policy.
This affects premium breakdown GST and insurer compliance GST calculations.
Term rider GST for bundled riders: 0%
Critical illness riders: 0% (if bundled)
Accidental death riders: 0% (if part of individual policy)
Standalone rider products: may attract 18% GST
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How to Calculate GST on Term Insurance Premium

After September 2025, GST calculation for individual term plans is simple.

Total Premium = Base Premium (No GST added)

Example:

₹20,000 premium → ₹20,000 payable

Before GST reform, 18% insurance premium GST increased the final amount significantly.

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Impact of GST on Term Insurance Premiums

GST reforms have improved affordability in the insurance sector.
This makes term insurance one of the most cost-effective life protection products available today.
Removes 18% tax burden on premiums
Encourages higher insurance adoption
Reduces cost of long-term protection plans
Simplifies insurer billing and pricing
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Input Tax Credit (ITC) on Term Insurance

ITC rules depend on policy type and usage.
This is important for insurer compliance GST and policyholder tax planning.
ITC is not available on exempt individual term insurance policies
Businesses may claim ITC on taxable group term insurance plans
ITC applies only where GST is charged and linked to taxable supply
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GST Benefits for Term Insurance Buyers

The updated GST framework offers several advantages.
This supports wider insurance penetration and financial security.
Zero GST reduces premium cost
Transparent term policy billing
Better affordability for families
Encourages long-term financial protection
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Why GST Matters for Your Term Insurance Purchase

GST directly affects your total premium and affordability.

Before purchasing, you should:
This helps optimise protection policy GST planning and long-term financial goals.
Check whether the policy is individual or group cover
Understand tax on riders and add-ons
Compare pre-GST and post-GST premium costs
Evaluate long-term savings from GST exemption
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GST Reforms 2.0 on Term Insurance

The 56th GST Council introduced a major reform by reducing GST on individual life insurance products, including term insurance, from 18% to 0% effective 22 September 2025. This change was introduced to make life protection products more accessible and affordable for Indian households.

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Additional Costs to Consider

Even though GST has been removed, some additional costs may still apply.
You should evaluate these separately to understand the full cost of your policy.
Rider charges (if standalone products)
Policy administration fees
Medical examination charges
Documentation or processing fees
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FAQs

What is GST on term plans?
GST on individual term insurance plans is 0% from September 22, 2025.
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Does GST apply on riders?
Bundled riders are GST-free. Standalone riders may attract 18% GST depending on classification.
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Why does GST increase total premium?
Earlier, 18% GST was added to the base premium, increasing the total payable amount. This has now been removed for individual term plans.
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Are term claims taxed?
No, term insurance claim payouts are not subject to GST.
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Is GST refundable?
Since GST on individual term insurance is now 0%, there is no GST charged and therefore no refund applies.
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Disclaimer

Shriram Finance strives to provide accurate and timely information about its products and services on its website and related platforms. Details mentioned here may vary from institution to institution and based on the customer profile. The content presented is intended for general informational purposes only and should not be considered a substitute for official product or service documentation. In cases of discrepancy, the terms specified in the official product or service documents will take precedence. Users are encouraged to consult with qualified professionals before making any decisions based on the information provided. Please review our Disclaimer page for detailed terms and conditions before making any financial decisions.

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