GST on insurance premiums: Term life insurance: 18% on full premium. Traditional/endowment plans (first year): 18% on 25% of premium (effective 4.5%). Subsequent years: 18% on 12.5% of premium (effective 2.25%). ULIPs: 18% on charges only (not the investment portion). Health insurance: 18% on entire premium. Vehicle insurance: 18% on premium. Budget 2025 discussions proposed reducing GST on health and term insurance — not yet implemented as of June 2026. Section 80D deduction includes GST paid on health insurance premiums.
18%
18% GST on health insurance premium — Section 80D deduction still available on total amount paid (incl. GST) The premium + GST combined is eligible for 80D deduction up to ₹25,000 (₹50,000 for senior citizens).
GST on All Insurance Types — Rate Table
Insurance Type
GST Rate
Taxable Value
Effective GST %
Term life insurance
18%
Full premium
18%
Endowment/traditional plan — Year 1
18%
25% of premium (value of supply)
~4.5%
Endowment/traditional plan — Year 2+
18%
12.5% of premium
~2.25%
Single premium life insurance
18%
10% of single premium
~1.8%
ULIP (Unit-Linked Insurance Plan)
18%
Charges only (alloc., admin, FMC)
Varies (on charges)
Health insurance (Mediclaim)
18%
Full premium
18%
Senior citizen health insurance
18%
Full premium
18%
Critical illness insurance
18%
Full premium
18%
Motor/vehicle insurance (own damage)
18%
Full premium
18%
Third-party vehicle insurance (TP)
18%
Full premium
18%
Fire & property insurance
18%
Full premium
18%
Marine insurance (goods in transit)
18%
Full premium
18%
Travel insurance
18%
Full premium
18%
Group health insurance (employer)
18%
Full premium
18%
Crop insurance (PMFBY)
0% (Exempt)
—
0%
Pradhan Mantri Jeevan Jyoti (PMJJBY)
0% (Exempt)
Government scheme
0%
Section 80D Deduction and GST — Important Note
Many taxpayers are unaware that the Section 80D deduction for health insurance can be claimed on the total premium paid including GST. The Income Tax Act does not exclude GST from the deduction. The CBDT position and judicial precedents support this interpretation. So if your health insurance premium is ₹23,000 and GST charged is ₹4,140, your total payment of ₹27,140 can be claimed under 80D (subject to the ceiling limit).
Similarly, for life insurance under Section 80C, the total amount paid to the insurer — including GST — qualifies as the premium paid for deduction purposes. This partially offsets the burden of the 18% GST on insurance products.
80D Deduction Limits (FY 2025-26): Self + family (below 60): ₹25,000 | If self/spouse is senior citizen: ₹50,000 | Additional for parents (below 60): ₹25,000 | Parents as senior citizens: ₹50,000. Maximum total 80D deduction: ₹1,00,000.
Budget 2025 Proposal: GST Reduction on Insurance
The Union Budget 2025 and subsequent GST Council discussions saw significant advocacy from the insurance sector, IRDAI, and consumer groups for reducing GST on health and term insurance from 18% to 5% or even 0%. The argument is that insurance penetration in India remains low (~4% of GDP) and the 18% GST acts as a disincentive, especially for health insurance which serves a social welfare purpose.
As of June 2026, no formal reduction has been notified. The 18% rate continues to apply on all insurance premiums except government-backed schemes (PMJJBY, PMFBY). Taxpayers should not rely on any proposed reduction until an official GST Council notification or amendment is published in the Official Gazette.
Frequently Asked Questions
What is the GST on term life insurance premium?
Term life insurance premiums attract 18% GST on the full premium amount. For example, if your annual term plan premium is ₹10,000, GST at 18% = ₹1,800, making the total payable ₹11,800. There is no reduced GST for term plans — the full 18% applies regardless of the sum assured or policy tenure. This is because term plans are pure risk covers with no maturity/survival benefit, and the entire premium is treated as the value of service. The 18% GST rate has applied since the GST rollout in July 2017.
Is GST included in Section 80D deduction for health insurance?
Yes. For the purpose of Section 80D deduction, the total premium paid including GST is eligible for deduction. If you pay ₹25,000 as health insurance premium and ₹4,500 as GST (18%), your total payment of ₹29,500 is eligible for 80D deduction (subject to the applicable limit of ₹25,000 for self/family or ₹50,000 for senior citizens). The CBDT and several High Court rulings have confirmed that the entire amount paid to the insurer — which includes GST — qualifies as the premium for the purpose of 80D. Similarly, for life insurance under Section 80C, the total payment including GST is deductible.
What is the GST rate on ULIP (Unit-Linked Insurance Plan) policies?
For ULIPs, GST at 18% applies only on the charges deducted by the insurer — specifically the Premium Allocation Charge, Fund Management Charge (FMC), Policy Administration Charge, Mortality Charge, and Surrender Charges. GST is NOT applied on the entire ULIP premium — only the service charges component is taxable. The investment portion of the ULIP premium (which goes into the fund) does not attract GST. This makes ULIPs relatively GST-efficient compared to traditional plans, since a large portion of the premium is pure investment with no GST applicability.
What is the health insurance GST rate in India?
Health insurance premiums (Mediclaim, floater plans, critical illness covers, hospital cash policies) attract 18% GST on the full premium amount. For a family floater policy with a premium of ₹20,000 per year, GST at 18% = ₹3,600, making the total payable ₹23,600. Senior citizen health insurance also attracts 18% GST. As of June 2026, despite recommendations from various quarters including insurance industry bodies and the Insurance Regulatory and Development Authority of India (IRDAI), the GST rate on health insurance has not been reduced, though Budget 2025 discussions flagged it as a concern.
Can businesses claim ITC on insurance premiums paid?
GST Input Tax Credit on insurance is available in limited circumstances. Blocked credits under Section 17(5) of the CGST Act restrict ITC on insurance for most purposes. ITC IS available for: (1) Marine insurance on goods being transported for business, (2) Insurance on plant and machinery used in business, (3) Vehicle insurance on vehicles used for transportation of goods/passengers as a business activity. ITC is NOT available on: (1) Life insurance premiums, (2) Health insurance for employees (unless legally mandated), (3) Vehicle insurance for cars used for personal/employee commute. Check with your tax advisor for specific cases.
