Health Insurance GST Rate

From September 22, 2025, health insurance plans will be offered at 0% GST on premiums, down from the previous 18%.

GST on health insurance is charged on the overall premium amount.
For example, let us consider you buy a health insurance policy with ₹5 lakhs coverage, and the annual premium is, say, ₹10,000.

The cost changes before and after the GST reform are as follows:

Key benefit - You can now purchase health insurance at the base premium without any additional tax. Use our health insurance premium calculator to determine the premium based on your selected policy, coverage, and add-ons.

Applicability -

• The 0% GST rate applies only to individual health insurance and family floater health insurance plans.
• Group health insurance policies are not covered under this reform.

Effective Date -

• The GST reform applies to health insurance plans purchased on or after September 22, 2025.

Policy Renewals -

• Health insurance plans renewed on or after September 22, 2025 are eligible for this benefit.
• Long-term health insurance plans, like those for two or three years, purchased before September 22, 2025, will benefit from the 0% GST on their next renewal after this date. Previously paid premiums are not refundable.

• Lower Premiums - With the GST rate reduction to 0%, you now pay only the base premium. This significantly lowers your overall health insurance cost.
• Stay Protected from Future Tax Changes - You can buy a multi-year policy to get the 0% GST benefit throughout the policy term, even if future tax policies change.
• More Affordable Coverage - The tax savings allow you to opt for a higher sum insured or include optional add-ons, such as critical illness insurance coverage.
• Wider Access to Plans - With increased affordability, you can explore and compare different health insurance plans for enhanced coverage.
• Substantial Benefits to Senior Citizens - Health insurance premiums for senior citizens are usually higher due to increased health risks. This reform will reduce their cost significantly.
• Greater Transparency- The GST reform makes health insurance premium calculation simpler and easier to understand with greater transparency.
• Reduced Medicine and Hospitalisation Expenses - The GST reforms lower the cost of medicines, consumables, and hospitalisation. This allows you to claim a slightly lesser portion of your sum insured, leaving more coverage available for future needs.
• Encourage First-time Buyers - The GST exemption will motivate the younger generation and families to prioritise health insurance and ensure financial protection for timely access to healthcare.
• Boost Health Insurance Penetration in India - With more affordable premiums, individuals from all sections of the Indian society, including rural areas, will be motivated to buy health insurance for better protection.

While the GST reform has reduced health insurance premiums for policyholders, it creates a different situation for insurers.

Under the new rule, insurers may not be able to claim the Input Tax Credit (ITC).
Just like we pay GST on certain products and services, insurers also pay GST for their business expenses. Generally, they recover this cost through Input Tax Credit, which means deducting the GST that they pay from the GST they collect on premiums.

With 0% GST, insurers may not be able to offset the GST paid on their expenses, which could lead to higher operational costs.

To manage these costs, the base health insurance premium might see a slight increase. However, this would happen only if no new provision is introduced to allow insurers to claim ITC.

As policyholders, we need to note that any such increase would remain minimal when compared to the major tax relief already declared. Even in this case, we can still expect a significant reduction in health insurance premiums.

In addition to the tax-saving benefit that you get from reduced GST, you can also claim a tax deduction under Section 80D while filing your Income Tax Returns (ITR).

According to Section 80D, you are eligible for a tax deduction on the health insurance premiums paid in the previous year. This benefit applies to health insurance policies purchased for you, including your family (spouse and dependent children), and also for your parents.

The maximum deduction allowed is ₹25,000 for individuals below 60 years of age and ₹50,000 for senior citizens. This means you can claim up to ₹1 lakh in a financial year.

The GST on health insurance premiums has been reduced significantly from 18% to 0%. The benefit is applicable to policies purchased or renewed on or after September 22, 2025.

It applies to all individual and family health insurance plans, including those purchased for senior citizens.

This GST reform makes health insurance more affordable and provides flexibility to opt for wider coverage.

TATA AIG offers a wide range of health insurance plans that allow you to customise the coverage specific to your healthcare needs.