Good news for people who buy life insurance. In its 56th meeting, the GST Council decided that there will be no GST on life insurance premiums.
This new rule will apply from 22 September 2025, the first day of Navratri.
Earlier, 18% GST was charged on life insurance premiums, but now it has been completely removed. This will directly benefit LIC policyholders as premiums will become cheaper.
How Much Will You Save?
For example, if you take a term insurance policy from LIC with an annual premium of ₹20,000, earlier you had to pay 18% GST (₹3,600). So, the total payable amount was ₹23,600.
Now, with GST at 0%, you will pay only ₹20,000, saving ₹3,600 every year.
For a premium of ₹1 lakh, the saving will be ₹18,000 yearly.
This makes a big difference, especially for long-term policies.
Other LIC policies like endowment plans had 4.5% GST in the first year and 2.25% in later years.
For example, on a ₹20,000 premium, you had to pay ₹900 extra in the first year and ₹450 from the second year onwards.
Now, with GST gone, these extra costs will also disappear, making insurance more affordable.
Effect on Insurance Companies
According to HSBC, demand for insurance will likely rise as premiums get cheaper.
However, companies will no longer get the benefit of Input Tax Credit (ITC), which could increase their expenses by 3–6%.
Still, big companies like LIC can handle this impact and continue to pass on the benefits of lower premiums to their customers.
A Boon for the Common People
This move will encourage more people, especially the middle class, to buy insurance. Many who avoided it earlier due to high costs will now find it easier to get coverage.
In short, this is a golden opportunity for LIC customers — they can enjoy better insurance coverage at a lower cost, ensuring more financial security for the future.
