GST Withdrawal from Insurance Premiums in India: What It Means for You

The Indian government recently announced the withdrawal of the Goods and Services Tax (GST) on individual life and health insurance premiums, effective September 22, 2025. This move is aimed at making insurance more affordable and accessible to the general public. But what does this mean for policyholders and insurers? Let’s break it down.

How Policyholders Benefit

1. Lower Premiums

Earlier, policyholders had to pay an 18% GST on top of their insurance premiums. With GST removed, the cost of insurance policies drops significantly. For example, a ₹10,000 premium will now cost exactly ₹10,000 instead of ₹11,800, giving an immediate saving of ₹1,800 per year.

2. Refunds on Multi-Year Policies

If you’ve paid premiums in advance for multiple years, you may be eligible for a GST refund for the period after September 22, 2025. While the exact refund process is still being clarified by insurers, this could translate into substantial savings for long-term policyholders.

3. Immediate Savings on New Policies

Any new policies purchased on or after September 22, 2025, will be GST-free. This gives policyholders instant financial relief and makes health and life insurance more accessible.

Challenges for Insurers

1. Loss of Input Tax Credit (ITC)

Insurers previously claimed ITC on GST paid for operational expenses. With GST removed, this credit is no longer available, potentially increasing insurers’ operational costs.

2. Possible Premium Adjustments

To compensate for lost ITC, some insurers may adjust premium rates or modify policy structures. While GST is gone, the base premium may still be revised, which could affect affordability for some policyholders.

3. Commission-Related Issues

Insurance agents’ commissions are still a point of concern. The Life Insurance Council has urged the government to remove GST on agents’ commissions. Without this, insurers face loss of ITC, which may indirectly affect profitability and policy offerings.

What Policyholders Should Do

1. Review Policy Documents – Understand how the GST exemption impacts your premium and coverage.

2. Consult Your Insurer – For multi-year policies, check if you are eligible for a refund.

3. Stay Updated – Watch for changes in premium structures as insurers adjust to this new tax regime.

Final Thoughts

The GST exemption on insurance premiums is a welcome step toward making insurance more affordable in India. While policyholders benefit immediately, insurers may face challenges that could affect policy pricing and offerings in the future. Staying informed and proactive will help you maximize the benefits of this new policy.

Learning the Art of Disciplined Savings

Money comes in and goes out, but disciplined saving ensures it always works for you. Here’s a practical roadmap to build strong savings habits—backed by numbers.

1. Change Your Mindset

Savings is not optional. Treat it like a bill you must pay yourself every month, just like rent or electricity. This mindset shift is the first step toward financial independence.

2. Pay Yourself First

The golden rule: save before spending. Automate savings by transferring a fixed percentage (say 20% of your salary) into a savings account or SIP.

Example: If you earn ₹25,000/month, saving 20% means ₹5,000 goes into your savings before you touch the rest.

3. Budget Smartly

Follow the 50-30-20 rule:

50% → Needs (₹12,500 for rent, bills, food)

30% → Wants (₹7,500 for entertainment, shopping)

20% → Savings/Investments (₹5,000)

Tracking your expenses weekly can prevent money leaks and help you stick to this plan.

4. Build an Emergency Fund

Life is unpredictable. An emergency fund of 3–6 months of expenses ensures you can handle crises without debt.

Example: If your monthly expenses are ₹20,000, aim for a fund of ₹60,000–₹1,20,000 in a liquid account.

5. Make Money Grow

Savings alone isn’t enough—invest to benefit from compounding.

Example: Saving ₹5,000/month for 10 years at 8% annual return:

Total invested: ₹5,000 × 120 months = ₹6,00,000

Approximate growth: ₹9,00,000

Even small amounts grow significantly over time.

6. Stay Consistent

Consistency beats timing the market. Avoid impulse spending and unnecessary loans.

Example: Saving just ₹3,000/month at 7% annual growth for 20 years:

Total invested: ₹7,20,000

Approximate value after 20 years: ₹16,80,000

Final Thoughts

Disciplined savings is about habit, not luck. Start small, stay consistent, and let time turn your efforts into financial security and independence. Your future self will thank you.