If you are thinking of taking out life insurance or you already have a policy, then there is some great news for you. The GST Council has taken a historic decision in its 56th meeting. From now on, there will be no GST on life insurance premiums.

This new rule will come into effect from 22 September 2025, i.e., the first day of Navratri. Earlier, GST of up to 18% was levied on the premium, but now it has been completely abolished. This decision will provide great relief to the common people, and taking insurance will become cheaper than ever.

LIC policyholders will benefit in this way

This decision will directly benefit those who are planning to take an LIC policy or are already paying premiums. Let’s understand this with simple math.

Term Insurance Policy

Suppose the annual premium of any of your term insurance policies is ₹ 20,000. Earlier, 18% GST, i.e., ₹ 3,600 extra, had to be paid on it. In total, you had to pay ₹ 23,600. But now that GST has become zero, you will have to pay only ₹ 20,000. This means that you will save ₹ 3,600 every year. If your premium is ₹ 1 lakh, then your direct savings will be ₹ 18,000.

Endowment Plan

Other policies, like an endowment plan, used to attract 4.5% GST in the first year and 2.25% in subsequent years. If your endowment premium is ₹ 20,000, then ₹ 900 was spent extra in the first year and ₹ 450 in subsequent years. Now all these extra expenses will end, which will reduce the burden on your pocket.

Impact of this decision on insurance companies

However, this decision will also affect insurance companies. According to a report, due to the removal of GST, the demand for insurance may increase due to the premium becoming cheaper, which is a good thing for the companies. But they will not get the benefit of input tax credit (ITC), which can change their expenses by 3-6%. Nevertheless, big companies like LIC can easily handle this change and pass on its full benefits to the customers.

This decision will prove to be a boon for the common people. Due to cheap insurance, more and more people will be attracted to it, which will increase financial security in the country. Especially the middle-class people, who were earlier hesitant to take insurance due to expensive premiums, will now be able to easily secure their and their family’s future. This is a golden opportunity for LIC customers, as now better security will be available at a lower cost.