Ahead of Budget 2026, some good news has emerged for the general public. If you are planning to buy life or health insurance, it has now become significantly more affordable than before. Last September, the government made a major decision to eliminate the heavy tax on individual insurance policies, directly reducing the burden on consumers’ pockets. Further relief is expected for this sector in the upcoming budget.
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What changed after the elimination of the tax on individual insurance?
From September 22, 2025, the government completely removed the 18 percent GST levied on individual life insurance and health insurance. This means that no tax is now payable on these policies. Previously, customers who paid a health insurance premium of Rs. 10,000 had to pay Rs. 11,800, including tax. Now, the same policy is available for just Rs. 10,000, resulting in significant annual savings.
Insurance becoming cheaper provides relief to ordinary families
After the removal of the tax, buying insurance has become easier for the middle class and salaried individuals. Health insurance, in particular, which has become essential in this era of rising medical costs, can now reach more people at a lower cost. Term insurance has also become cheaper, attracting people towards higher coverage, which is crucial for future financial security.
High expectations from Budget 2026
Although GST has already been removed, insurance policyholders expect further tax relief in the upcoming budget. Currently, the tax exemption limit on health insurance premiums is limited and is quickly exhausted. The insurance industry wants this limit to be increased so that people can opt for better coverage without worrying about taxes. Additionally, there is a growing demand to separate term insurance from Section 80C and provide it with a separate tax exemption.
Which insurance policies are not eligible for relief?
While individual life and health insurance policies have become tax-free, group insurance provided by companies is still subject to an 18 percent GST. In addition, car and bike insurance remain subject to tax as before. This means that the relief is currently only available to those purchasing individual insurance policies.
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What to keep in mind when buying a policy?
If you are planning to buy a new insurance policy or renew your old one, be sure to check the premium receipt. The GST amount should now be zero for individual health or term insurance policies. By obtaining a policy with accurate information, you can save thousands of rupees every year.