In a major relief to policyholders, the Government of India has announced zero GST on health insurance premiums starting from September 2025. This landmark decision is expected to make health insurance more affordable for millions of families, especially at a time when rising medical costs are a growing concern. By removing the 18% Goods and Services Tax (GST) previously levied on premiums, the government has provided direct savings to citizens while boosting insurance adoption across the country.
Previous GST Structure on Health Insurance
Until September 2025, health insurance premiums attracted an 18% GST, which significantly increased the annual cost of policies. For instance:
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A ₹20,000 health insurance premium became ₹23,600 after GST.
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A ₹40,000 family floater premium cost nearly ₹47,200 with GST included.
For middle-class families, this tax burden often acted as a deterrent, discouraging many from purchasing health insurance despite knowing its importance.
The New Zero GST Reform
From September 2025, health insurance premiums will no longer carry GST. This reform applies to:
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Individual health insurance plans
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Family floater policies
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Senior citizen health insurance
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Critical illness covers
By eliminating GST, the government aims to increase health insurance penetration from the current 30% to over 50% by 2030.
How Much You Will Benefit
The savings are immediate and significant. Here are some examples:
| Premium Before GST | GST (18%) | Total Paid Earlier | New Cost After Zero GST | Savings |
|---|---|---|---|---|
| ₹20,000 | ₹3,600 | ₹23,600 | ₹20,000 | ₹3,600 |
| ₹40,000 | ₹7,200 | ₹47,200 | ₹40,000 | ₹7,200 |
| ₹60,000 | ₹10,800 | ₹70,800 | ₹60,000 | ₹10,800 |
This reform directly saves families thousands of rupees every year, making health insurance far more accessible.
Impact on Families and Middle Class
For middle-class households, zero GST means more flexibility in choosing higher coverage at the same budget. Families can now:
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Opt for larger sum insured plans without worrying about tax hikes.
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Upgrade to cashless hospitalization policies with better features.
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Invest in critical illness add-ons to secure against rising lifestyle diseases.
This step also encourages younger individuals to purchase insurance earlier in life.
Benefits for Senior Citizens
Senior citizen health insurance premiums are usually higher due to age-related risks. The removal of GST will especially help older citizens save more. For example, a senior policy costing ₹55,000 earlier required nearly ₹65,000 with GST. Now, the cost drops back to ₹55,000, saving a substantial ₹10,000.
Boost for Insurance Companies
The reform is not just a win for customers but also for the insurance sector. Lower costs are expected to:
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Increase the number of policyholders.
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Encourage rural families to adopt health insurance.
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Improve revenue for insurers through higher volumes despite reduced taxes.
This move aligns with the government’s goal of making Ayushman Bharat and universal health coverage a reality by promoting private insurance adoption.
Industry Experts’ View
Industry leaders have welcomed the reform, calling it a game-changer.
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According to the General Insurance Council, the removal of GST could bring an additional 10–15 crore new policyholders into the system over the next few years.
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Financial advisors recommend families to review and upgrade existing policies now since premiums will be lighter on the pocket.
Comparison with Other Countries
In many developed countries, health insurance is either tax-free or subsidized, and India has now taken a step in the same direction. By aligning with global practices, India is showing its commitment to making healthcare affordable and accessible to all.
Verdict: A Step Towards Affordable Healthcare
The GST on insurance 2025 reform is a bold and welcome move by the government. By scrapping the 18% GST on health insurance premiums, it provides immediate financial relief to families, boosts policy adoption, and strengthens the healthcare safety net for citizens.
In September 2025, this decision stands out as one of the most impactful financial reforms of the year, promising long-term benefits for both policyholders and the insurance industry. For families still without insurance, now is the perfect time to invest in a plan that protects health and finances alike.
FAQs
What was the GST rate on health insurance before September 2025?
It was 18% on all health insurance premiums.
Does zero GST apply to all types of health insurance?
Yes, it applies to individual, family floater, senior citizen, and critical illness policies.
How much can I save after GST removal?
You save 18% of your premium cost. For example, a ₹40,000 policy now saves you ₹7,200 annually.
Will this reform increase insurance adoption?
Yes, experts predict a sharp rise in policyholders due to reduced costs.
Does this apply to life insurance policies too?
No, the reform currently applies only to health insurance premiums.
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