Zero GST on Health Insurance:
Demand Surges 38% – What Consumers & Businesses Should Know
The decision by the government to exempt GST on health (and
life) insurance premiums has caused a noticeable shift in consumer behaviour. According to a
recent report, demand for high-sum insured health insurance plans has jumped by around 38% following the GST exemption.
Below, we’ll explain what changed,
why the surge, who benefits, and how Trakintax
can help you make smart decisions about buying or advising on health insurance.
In this blog, let’s break down what these changes mean for
businesses, consumers, and the economy — and how experts like Trakintax are helping entrepreneurs stay ahead of the curve.
What exactly
changed?
From 22 September 2025, premiums
for individual health and life insurance policies become zero GST – meaning
you’ll no longer pay the GST component on these premiums.
The report found that the average sum insured has increased from
₹13 lakh to about ₹18 lakh, showing that buyers are
opting for more comprehensive cover.
The proportion of new buyers choosing coverage in the ₹15-25 lakh range has risen. The share of low-coverage (
<₹10 lakh) plans has declined from ~24% to ~18%.
Why is demand
rising so fast?
Affordability improved:
Removing GST reduces cost of premiums, making higher coverage more attainable.
Awareness of health
risks: Post-pandemic, people are more conscious about needing stronger health
protection.
Coverage upgrade
opportunity: With tax savings, many are shifting from minimal cover to more
robust plans.
Geographic spread: The
surge isn't just in metros—Tier-2 and smaller cities show increased demand.
Key Trends at
a Glance
Aspect
Before GST Exemption
After GST Exemption
Average sum insured
~₹13 lakh
~₹18 lakh
Share of buyers choosing <₹10
lakh cover
~24%
~18%
Share choosing ₹15-25 lakh
cover
~44% in smaller cities
~48.6% in smaller cities
Seniors (61-75 yrs +)
purchasing high cover
Base lower
~11.5% increase in higher
coverage
Who benefits
from this change?
Consumers / Policyholders
Lower overall cost for insurance premiums → more value for
money
Opportunity to upgrade coverage
without paying extra tax
Especially beneficial for senior
citizens, families in Tier-2 cities, and those who had minimal cover
Insurance Companies & Brokers
Rising demand creates growth opportunities
Need to redesign products (higher sums insured, more add-ons)
With aid from advisors, they can guide clients to optimize
purchase timing
Advisory Firms & Tax/Compliance Professionals
Opportunity to advise clients on how to lever these tax
changes
Ensure clients follow correct guidelines for claims/deductions
What should
YOU do now? (with Trakintax’s help)
If you’re in the market for health insurance or advising
clients, here’s your action checklist:
Review existing
coverage: If you have a basic plan, check whether upgrading makes sense now
that GST is zero.
Compare sum insured and
benefits: Higher cover often reduces risk of out-of-pocket expenses,
especially with rising healthcare costs.
Look into
add-ons/riders: Features like Day-1 Pre-Existing Disease (PED) cover or
critical illness riders have gained traction.
Purchase timing: Since
GST relief is effective, consider acting sooner rather than later. Delaying may mean
missing promotions or being caught in product redesign cycles.
Professional advice:
With Trakintax, we help you analyse your health insurance need, compare policy options,
and structure the cover to maximise benefit under the new
tax-free regime.
Document & file correctly:
If you’re a business or advisor, ensure proper documentation and premium payment
records—especially when larger sums insured are involved.
Compare sum insured and
benefits: Higher cover often reduces risk of out-of-pocket expenses,
especially with rising healthcare costs.
Compare sum insured and
benefits: Higher cover often reduces risk of out-of-pocket expenses,
especially with rising healthcare costs.
Final
Thoughts
The zero-GST move on health insurance is more than just a tax
change—it’s a strategic opportunity. Whether you’re buying your first policy, upgrading
coverage, or advising clients, the time is right for action.
With demand already up by 38% and higher sums insured
becoming the new norm, smart planning matters more than ever.
Contact us today for a free consultation.
Mobile: 9358072247
Gmail: trakintax@gmail.com
Frequently
Asked Questions (FAQs)
It means that from September 22, 2025, the government has removed the 18% GST on
premiums paid for individual health and life insurance plans. This makes the
overall cost of health insurance lower and more affordable for consumers.
If your yearly premium was ₹20,000 before, you earlier paid ₹3,600 as GST (18%).
Now, that amount is saved — so you pay only ₹20,000, not ₹23,600. The higher
your premium, the more you save.
Currently,zero GST applies to individual health and life
insurance policies. Group or corporate insurance plans may still be
taxed depending on how the policy is structured.
Because the exemption made policies more affordable and encouraged people to buy
higher coverage amounts. Consumers now prefer plans between ₹15 lakh – ₹25 lakh
rather than minimal coverage plans.
Yes, absolutely. Data shows that seniors aged 61–75 years are now buying
higher-sum insured plans more than before — with an 11.5% rise in large-coverage purchases.
Even without GST, you can still claim a deduction under
Section 80D of the Income-Tax Act for the premium you pay — up to
₹25,000 (₹50,000 for senior citizens).
Yes. With no GST, upgrading to a higher-sum insured plan is financially smarter.
You get more coverage for nearly the same cost as before the exemption.
The insurance industry is expected to see higher policy
renewals and new enrollments, leading to better long-term growth.
Agents and advisors can now focus on value-driven, higher-coverage plans
At Trakintax, we help individuals and small
businesses:
Choose the right insurance policy under the zero-GST regime,
Ensure premium documentation aligns with tax rules, and
Integrate insurance benefits into overall financial planning.
It depends on your age, income, health condition, and family size. You can consult Trakintax for a personalized review — we’ll compare policies, explain coverage limits, and recommend the best plan based on your needs and tax benefits.
