Key Takeaways
- Individual life insurance (term, endowment, ULIP, annuity) and individual health insurance (family floater, senior citizen, critical illness) carry 0% GST from September 22, 2025 under the GST 2.0 rate revision.
- Group health insurance (employer group policies) remains at 18% GST. Employers can claim Input Tax Credit (ITC) on this premium if used for business purposes.
- Motor/vehicle insurance (third-party and comprehensive) continues at 18% GST. ITC is blocked for most businesses under Section 17(5) of the CGST Act.
- Other general insurance (fire, marine, liability, property) and reinsurance remain at 18% GST.
- Section 80D deduction for health insurance applies on the gross premium including GST. Section 80C applies similarly for life insurance premiums.
- Insurance claim payouts are not subject to GST as they are not a supply of service.
What is the GST rate on insurance premiums in India in 2026? From September 22, 2025, individual life insurance and individual health insurance premiums carry 0% GST (fully exempt) under the GST 2.0 rate restructuring. Group health insurance, motor insurance, fire, marine, liability, and all other general insurance premiums attract 18% GST. (56th GST Council Meeting; Notification No. 11/2017-CT(R) as amended by GST 2.0 rate revision effective September 22, 2025.)
The Goods and Services Tax on insurance premiums underwent a significant shift on September 22, 2025. Under the GST 2.0 rate restructuring, individual life and health insurance policies are now fully exempt from GST. Before this reform, every insurance premium, whether for a Rs 50 lakh term plan or a basic family floater, carried an 18% GST burden.
For businesses, the picture is more nuanced. Group health insurance, motor insurance, and general insurance policies continue at 18% GST, with ITC availability depending on the nature of the business and the specific policy type. This guide breaks down the current GST treatment of every category of insurance premium, the applicable SAC codes, ITC eligibility rules, and how the GST component interacts with income tax deductions under Sections 80C and 80D.
Looking for expert help with GST on insurance premiums India 2026 life health motor rates? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant end-to-end: filings, notices, and advisory, all in one place.
GST 2.0: What Changed for Insurance on September 22, 2025
The GST Council's rate restructuring (commonly called GST 2.0) replaced the old four-slab system (0/5/12/18/28%) with a simplified structure (0/5/18/40%). For insurance, the critical change was the removal of the 18% GST on individual life and health insurance premiums, bringing them to 0%.
This was not a conditional exemption or a rebate. Individual life and health insurance services are now exempt from GST, meaning insurers do not charge GST on these premiums, and the exemption flows directly to the policyholder as a lower premium amount.
Tax Rate Chart
GST Rates on Insurance Premiums (Post GST 2.0)
Effective September 22, 2025
Individual Life Insurance (Term, Endowment, ULIP, Annuity)
Fully exempt from GST 2.0
Individual Health Insurance (Family Floater, Senior Citizen, Critical Illness)
Fully exempt from GST 2.0
Group Health Insurance (Employer Policies)
ITC available for business use
Motor/Vehicle Insurance (Third-Party + Comprehensive)
ITC blocked for most businesses
Other General Insurance (Fire, Marine, Liability)
ITC available for business use
Reinsurance Services
Between insurer and reinsurer
Source: 56th GST Council Meeting; Notification No. 11/2017-CT(R) as amended, effective September 22, 2025
Before vs After: The Premium Impact
For a policyholder paying Rs 25,000 per year for a health insurance family floater:
| Component | Before Sept 22, 2025 | After Sept 22, 2025 |
|---|---|---|
| Base premium | Rs 21,186 | Rs 25,000 |
| GST at 18% | Rs 3,814 | Rs 0 |
| Total paid | Rs 25,000 | Rs 25,000 |
| Effective saving | - | Rs 3,814 on renewal (or same premium with 18% higher coverage) |
In practice, insurers either reduced the total premium outright or enhanced the sum insured for the same premium amount. Either way, the policyholder gets more value per rupee.
Life Insurance: GST Treatment by Policy Type
Life insurance in India covers several distinct product categories. From September 22, 2025, all individual life insurance policies are exempt from GST.
Individual Life Insurance Policies (0% GST)
All individual life insurance policies issued to natural persons are exempt from GST (56th GST Council Meeting, PIB Press Release):
| Policy Type | GST Rate | Notes |
|---|---|---|
| Term insurance (pure risk cover) | 0% | No savings component; death benefit only |
| Endowment plans | 0% | Savings + insurance; maturity benefit included |
| Money-back plans | 0% | Periodic payouts during the term |
| Whole life insurance | 0% | Coverage until death or age 99/100 |
| Individual annuity plans | 0% | Pension/annuity payouts after vesting |
| ULIPs (Unit Linked Insurance Plans) | 0% | All charges (fund management, mortality, administration) exempt |
ULIPs: Full Exemption for Individual Policyholders
Individual ULIPs are fully covered under the GST exemption. The PIB press release from the 56th GST Council explicitly lists "ULIP" among the exempted individual life insurance policies. All charges within the ULIP, including fund management charges, mortality charges, premium allocation charges, and policy administration charges, carry 0% GST for individual policyholders.
Before the exemption, ULIP holders paid 18% GST on each of these charge components separately, which significantly increased the effective cost. With the exemption, a larger share of the premium flows directly into the investment fund and life cover.
Group ULIPs: Employer-sponsored group ULIPs and group life insurance policies continue to attract 18% GST. The exemption applies only to individual ULIP policies.
Group Life Insurance (18% GST)
Group life insurance policies taken by employers for their employees continue to attract 18% GST. The employer pays the premium (including GST) and can claim ITC if the policy is part of the employment terms and conditions, making it a business expenditure.
Health Insurance: Individual vs Group
Individual Health Insurance (0% GST)
Every individual health insurance policy is now GST-exempt:
- Family floater plans
- Individual health plans
- Senior citizen health plans (including those under the IRDAI Senior Citizens Health Insurance scheme)
- Critical illness plans
- Personal accident covers
- Top-up and super top-up plans
The exemption applies to both new policies and renewals. If a policy was taken before September 22, 2025 and the renewal date falls after that date, the renewal premium carries 0% GST.
Group Health Insurance (18% GST)
Group mediclaim and group health insurance policies purchased by employers for employees remain at 18% GST. This is the single largest insurance-related GST cost for most businesses.
Comparison
Individual vs Group Health Insurance: GST Treatment
Post GST 2.0 (September 22, 2025 onwards)
| Parameter | Individual Health | Group Health |
|---|---|---|
| GST Rate | 0% | 18% |
| Who Pays | Policyholder | Employer |
| ITC Available | No (not a business expense) | Yes (if used for business) |
| 80D Deduction | Yes (individual's return) | No (employer claims under Section 37) |
| Typical Premium | Rs 15,000 to Rs 1,00,000/year | Rs 3,000 to Rs 15,000/employee/year |
| Net GST Cost | Zero | Partially offset by ITC claim |
Source: 56th GST Council; Section 17(5), CGST Act 2017
Third-Party Administrator (TPA) Services
TPA services for health insurance claims processing attract 18% GST (SAC 997136). This GST is borne by the insurer (not the policyholder directly) and forms part of the insurer's cost structure.
Motor Insurance: No Change Under GST 2.0
Motor insurance was not included in the GST 2.0 exemption for individual policies. Both third-party liability insurance (mandatory under the Motor Vehicles Act) and comprehensive/own-damage policies continue at 18% GST.
| Motor Policy Type | GST Rate | Mandatory? |
|---|---|---|
| Third-party liability (TP) | 18% | Yes (Motor Vehicles Act, 1988) |
| Own-damage / comprehensive | 18% | No (but recommended) |
| Personal accident cover for owner-driver | 18% | Yes (Rs 15 lakh cover mandatory) |
This means a car owner paying Rs 12,000 for a comprehensive policy pays Rs 2,160 as GST, making the total Rs 14,160. There is no exemption regardless of whether the vehicle is for personal or commercial use.
Other General Insurance: 18% Across the Board
All non-life, non-health general insurance policies remain at 18% GST:
| Insurance Type | GST Rate | SAC Code |
|---|---|---|
| Fire insurance | 18% | 997134 |
| Marine insurance (cargo) | 18% | 997134 |
| Marine insurance (hull) | 18% | 997134 |
| Professional liability / E&O | 18% | 997134 |
| Directors and Officers (D&O) | 18% | 997134 |
| Property / burglary insurance | 18% | 997134 |
| Engineering insurance (CAR/EAR) | 18% | 997134 |
| Cyber risk insurance | 18% | 997134 |
| Workmen's compensation | 18% | 997134 |
| Crop / agriculture insurance (PMFBY) | 0% | 997134 |
Exception: Crop insurance under the Pradhan Mantri Fasal Bima Yojana (PMFBY) is exempt from GST as a government scheme for the agricultural sector.
SAC Codes for Insurance Services
The Services Accounting Code (SAC) classification determines GST treatment. All insurance services fall under Heading 9971 (Financial and related services).
| SAC Code | Description | GST Rate |
|---|---|---|
| 997131 | Life insurance services (pension, annuity) | 0% (individual) / 18% (group) |
| 997132 | Life insurance services (term, endowment, whole life) | 0% (individual) / 18% (group) |
| 997133 | Health and accident insurance services | 0% (individual) / 18% (group) |
| 997134 | General insurance services (motor, fire, marine, liability) | 18% |
| 997135 | Reinsurance services | 18% |
| 997136 | Services auxiliary to insurance (TPA, broking, surveying) | 18% |
For GST return filing (GSTR-1 and GSTR-3B), insurance companies use these SAC codes to classify their output supplies. Businesses claiming ITC on insurance premiums must verify that the SAC code on the insurer's tax invoice matches the correct service category.
Input Tax Credit (ITC) on Insurance Premiums
ITC eligibility on insurance premiums is one of the most misunderstood areas of GST. The rules differ sharply based on the type of insurance and the nature of the business.
Where ITC Is Available
| Insurance Type | ITC Available? | Condition |
|---|---|---|
| Group health insurance (employer policy) | Yes | Must be obligatory under any law, or part of employment terms/conditions |
| Fire / property insurance (business premises) | Yes | Premises used for business purposes |
| Marine cargo insurance (goods in transit) | Yes | Goods must be for business supply |
| Professional liability / D&O insurance | Yes | Direct business expense |
| Workmen's compensation insurance | Yes | Statutory obligation for employers |
| Cyber risk insurance | Yes | Business asset protection |
Where ITC Is Blocked
Section 17(5) of the CGST Act blocks ITC on specific categories, and motor insurance is the most significant one for businesses.
Motor vehicle insurance: ITC on motor insurance premiums is blocked under Section 17(5)(a) for most businesses. The only exceptions are:
- Motor vehicle dealers (insurance is part of the supply chain)
- Driving schools (motor vehicles are used for the taxable supply of training)
- Transport companies (vehicles are the direct means of supply)
- Businesses providing motor vehicle rental services
For all other businesses, even if the vehicle is used exclusively for business purposes (e.g., a company car), the ITC on motor insurance is blocked. This is a hard block with no workaround.
Individual policyholders: No ITC is available for any insurance premium paid in a personal capacity. ITC is a concept applicable only to registered businesses for business-purpose expenditure.
Common ITC mistake: Businesses often claim ITC on comprehensive motor insurance for company-owned vehicles used by directors or employees. This ITC will be reversed during audit or assessment, with interest under Section 50 and potential penalty under Section 74. Unless your business falls within the four exceptions listed above, do not claim ITC on motor insurance.
Group Health Insurance ITC: The Compliance Detail
Step-by-Step Guide
Claiming ITC on Group Health Insurance
Six conditions that must all be met
Policy covers employees
Not contractors or freelancers. Policy must be an employer-employee arrangement.
Employer pays the premium
Premium paid by the employer, not deducted from employee salary as a voluntary benefit.
Part of employment terms
Insurance must be part of terms and conditions of employment, or mandated by law.
Invoice in business name
Insurer's tax invoice must carry the business GSTIN.
Reflected in GSTR-2B
Invoice must appear in the business's GSTR-2B for the relevant tax period.
Claimed within time limit
ITC claimed before the earlier of November 30 of the following FY or the GSTR-9 filing date (Section 16(4)).
Source: Sections 16 and 17(5), CGST Act 2017
GST and Income Tax: The Section 80C/80D Interaction
A question that comes up every ITR season: does the Section 80D deduction for health insurance apply on the premium amount before or after GST?
Section 80D: Health Insurance Premium
The deduction under Section 80D is available on the gross premium paid, including the GST component. Since individual health insurance premiums now carry 0% GST, the entire premium amount qualifies for deduction.
| Policyholder | Maximum 80D Deduction |
|---|---|
| Self, spouse, children (below 60) | Rs 25,000 |
| Self, spouse, children (60 or above) | Rs 50,000 |
| Parents (below 60) | Rs 25,000 |
| Parents (60 or above) | Rs 50,000 |
| Maximum total | Rs 1,00,000 |
Before GST 2.0, a policyholder paying Rs 25,000 for health insurance was effectively paying Rs 21,186 as premium and Rs 3,814 as GST. The full Rs 25,000 qualified under 80D. Now, the entire Rs 25,000 is pure premium (0% GST), so the deduction amount remains the same but the insurance coverage per rupee is higher.
Section 80C: Life Insurance Premium
Life insurance premiums paid for self, spouse, or children qualify for deduction under Section 80C (within the Rs 1,50,000 aggregate cap). The GST component was always included in the deductible amount. With 0% GST on individual life premiums, the entire premium is now the insurance cost itself.
Insurance Claim Payouts: No GST
Insurance claim settlements are not subject to GST. A claim payout is not a "supply of service" under the GST framework. It is a contractual obligation arising from the insurance contract, not a fresh transaction.
This applies uniformly to:
- Death benefit payouts under life insurance
- Maturity proceeds from endowment and money-back plans
- Health insurance cashless settlements and reimbursements
- Motor insurance claim settlements (own-damage and third-party)
- Fire, marine, and property insurance claim payouts
- Annuity payouts from individual annuity policies
Common Mistakes
-
Claiming ITC on motor insurance for company cars. Unless your business is a vehicle dealer, driving school, transport company, or rental service, this ITC will be reversed with interest.
-
Assuming group health insurance is also exempt. Only individual policies carry 0% GST. Employer group policies remain at 18%.
-
Missing ITC on eligible general insurance. Businesses often overlook ITC on fire, marine, and professional liability premiums. If the insured asset or activity is for business, the ITC is available.
-
Not verifying SAC codes on invoices. Incorrect SAC codes on the insurer's tax invoice can lead to ITC mismatches during GSTR-9 reconciliation.
-
Confusing GST exemption with ITC availability. Individual policyholders pay 0% GST, so there is no ITC question. ITC applies only to businesses paying 18% GST on group or general insurance.
Compliance Checklist for Businesses
| Action | Frequency | Relevant For |
|---|---|---|
| Verify SAC code on insurer's tax invoice | Each premium payment | All businesses |
| Match insurer's invoice in GSTR-2B | Monthly | Businesses claiming ITC |
| Confirm ITC eligibility before claiming | Each premium payment | Group health, fire, marine, liability |
| Do NOT claim ITC on motor insurance | Each premium payment | All businesses except dealers/transport |
| Reconcile ITC claimed vs GSTR-2B | Before GSTR-9 filing | All businesses claiming insurance ITC |
| Track Section 16(4) time limit for ITC | Annual | All businesses with insurance ITC |
| Review group health policy terms for ITC validity | Annual / on renewal | Employers with group health policies |
Frequently Asked Questions
Is GST applicable on health insurance premiums in 2026?
Individual health insurance premiums (family floater, senior citizen, critical illness, personal accident) carry 0% GST from September 22, 2025 under the GST 2.0 rate revision. Group health insurance policies taken by employers for employees attract 18% GST.
What is the GST rate on term life insurance?
0%. All individual life insurance policies, including term plans, endowment plans, whole life policies, ULIPs, and individual annuity plans, are exempt from GST from September 22, 2025.
Can my business claim ITC on motor insurance?
Only if your business is a motor vehicle dealer, driving school, transport company, or motor vehicle rental service. For all other businesses, ITC on motor vehicle insurance is blocked under Section 17(5)(a) of the CGST Act.
Is GST charged on insurance claim payouts?
No. Insurance claim settlements (health cashless, motor claims, life death benefit, fire loss) are not subject to GST. They are contractual obligations, not a supply of service.
Can I claim ITC on group health insurance premium?
Yes, if the group health policy is in the employer's name, the premium is paid by the employer, and the insurance is part of the terms and conditions of employment or mandated by law. The insurer's invoice must carry your GSTIN.
Does Section 80D deduction apply on the GST portion of health insurance?
Section 80D deduction applies on the gross premium including GST. Since individual health premiums now carry 0% GST, the entire premium qualifies for deduction. The maximum is Rs 25,000 (below 60 years) or Rs 50,000 (60 and above) for self/family, plus the same for parents.
What is the SAC code for health insurance?
SAC 997133 covers health and accident insurance services. For life insurance, use SAC 997131 (pension/annuity) or 997132 (term/endowment). For motor and general insurance, use SAC 997134.
Is GST applicable on ULIPs?
No. Individual ULIPs are covered under the GST exemption for individual life insurance policies from September 22, 2025. All charges within the ULIP, including fund management, mortality, and administration charges, are exempt from GST for individual policyholders. Group ULIPs remain at 18% GST.
What about crop insurance under PMFBY?
Crop insurance under the Pradhan Mantri Fasal Bima Yojana is fully exempt from GST as a government agricultural scheme. This exemption predates GST 2.0 and continues unchanged.
When did the GST exemption on individual insurance start?
September 22, 2025. This date marks the implementation of the GST 2.0 rate restructuring. Any individual life or health insurance premium paid on or after this date carries 0% GST.
This guide covers GST on insurance premiums under the GST 2.0 rate restructuring effective September 22, 2025. Rate classifications are based on Notification No. 11/2017-Central Tax (Rate) as amended, Notification No. 12/2017-Central Tax (Rate) for exemptions, and the 56th GST Council Meeting decisions. SAC codes follow the Services Accounting Code classification under Heading 9971. ITC provisions reference Sections 16 and 17(5) of the CGST Act, 2017. Section 80C and 80D deduction rules reference the Income Tax Act, 1961 (Section 126 under the Income Tax Act, 2025). All rates verified against the PIB press releases (pib.gov.in), the Department of Financial Services (financialservices.gov.in), and the CBIC GST portal. Consult your CA or tax advisor for policy-specific GST treatment.
Work with the Trusted Tax & Compliance Services in Kondapur, Hyderabad - Tax Garden for expert GST filing, ITR, TDS, ROC, and startup compliance support.
Frequently Asked Questions: Tax Services in Kondapur & Hyderabad
What makes Tax Garden a preferred GST consultant in Kondapur?
Tax Garden is ISO 9001:2015 certified and backs every engagement with Kavach, our ₹50,000 error-protection cover. Our flat-fee, no-surprise pricing and dedicated account manager make us a compliance partner for startups and SMEs in Kondapur's HITEC City corridor.
Why is Tax Garden a trusted tax compliance partner in Hyderabad?
Trust comes from three pillars at Tax Garden. First, transparency: you know the exact fee before you sign up, and it never changes mid-year. Second, certified expertise: our compliance team is qualified, and the firm holds ISO 9001:2015 certification. Third, accountability: Kavach, our unique error-protection plan, covers up to ₹50,000 in service charges for any clerical mistake made by our team.
Is there a reliable tax consultant near me in Kondapur?
Yes. Tax Garden's office is in Kondapur itself (CWS One Building, Hanuman Nagar). You can book an in-person consultation or get everything done fully online via WhatsApp and our client portal. We serve walk-in clients by appointment and remote clients across all of Hyderabad and Telangana.
I want a friendly CA who explains things clearly. Is that Tax Garden?
Absolutely. Every client gets a dedicated account manager reachable on WhatsApp, plain-language explanations of what is filed and why, and proactive reminders before every deadline. No jargon, no surprises, just friendly, expert compliance support from Kondapur.
Where is Tax Garden located in Hyderabad?
Tax Garden is located at 4th Floor, South Block, CWS One Building, Hanuman Nagar, Kondapur, Hyderabad, Telangana 500084. We serve clients across Kondapur, HITEC City, Gachibowli, Madhapur, Jubilee Hills, Banjara Hills, and all of Hyderabad.
Can I get GST filing and registration services in Kondapur?
Yes. Tax Garden offers end-to-end GST services from our Kondapur office: GST registration, GSTR-1, GSTR-3B, GSTR-9 annual returns, ITC reconciliation, e-invoicing setup, and GST notice handling for businesses of all sizes in Kondapur and Hyderabad.
Do you file ITR for salaried employees and businesses in Hyderabad?
Yes. Our Kondapur team files ITR for salaried employees, freelancers, consultants, business owners, LLPs, and companies across Hyderabad. We cover ITR-1 through ITR-6 with complete Chapter VI-A deduction optimisation, AIS reconciliation, and advance tax planning.
Which areas in Hyderabad does Tax Garden serve?
Tax Garden's Kondapur office serves clients across Hyderabad including HITEC City, Gachibowli, Madhapur, Jubilee Hills, Banjara Hills, Begumpet, Secunderabad, Ameerpet, Kukatpally, Uppal, LB Nagar, and all of Telangana. Most services are available fully online.
What compliance services does Tax Garden offer for startups in Kondapur?
Tax Garden is a compliance partner for startups in Kondapur and Hyderabad's HITEC City corridor. We handle company incorporation, GST registration, TDS filings, payroll, ROC annual filings, director KYC, and annual ITR filing, all under one flat-fee plan.
How is Tax Garden different from traditional accountants and tax firms in Hyderabad?
Unlike traditional accounting practices that charge hourly and are difficult to reach, Tax Garden operates on flat-fee subscription plans with a dedicated account manager, monthly compliance updates, and WhatsApp-first communication. Our AI-powered workflow catches errors before filings are submitted, and Kavach error-protection ensures you are never left alone if something goes wrong.