In India, where healthcare costs are rising steadily, health insurance is not just a safety net it’s a necessity. But have you ever noticed the tax component while paying your premium? That’s GST (Goods and Services Tax), silently adding to your annual cost.
Key Takeaways
- GST on health insurance is 18%
- It applies to all types of health policies
- You cannot claim deduction on GST, only on the base premium
- Businesses may claim ITC, individuals cannot
What is the GST Rate on Health Insurance?
Health insurance premiums in India are taxed under GST at 18%. This rate applies uniformly whether it’s an individual health policy, family floater plan, or a senior citizen policy.
Is GST on Health Insurance Tax-Deductible?
Yes! The good news is that one can claim a deduction under Section 80D of the Income Tax Act under the old regime of taxation. This deduction is applicable on the base premium, not the GST amount.
- Up to ₹25,000 deduction for self, spouse, and children.
- Additional ₹25,000 (or ₹50,000 for senior citizens) for parents.
Why Is GST Charged on Insurance?
Health insurance is classified as a financial service, which is taxable under GST. Unlike life insurance, where only a part of the premium is taxed, health insurance attracts GST on the full premium.
Can One Avoid Paying GST?
No. GST is a mandatory indirect tax collected by the insurer and paid to the government. However, businesses registered under GST may claim Input Tax Credit (ITC) if the insurance is taken for employees, subject to conditions under Section 17(5) of CGST Act.
2025 Updates and Proposals
The GST Council is considering changes to the tax on health insurance in 2025. No new rate has been implemented yet – the 18% rate remains in force.
However, the Group of Ministers and the IRDAI have proposed cutting or even exempting GST on some policies. Reports from mid-2025 indicate that the government is looking at reducing GST on health cover (for example to 5% for certain plans) or making premiums up to ₹5 lakh fully exempt.
These proposals aim to make health insurance more affordable. A final decision from the GST Council is expected after its 2025 meetings, but until then the standard 18% rate applies.
FAQs
The current GST Rate for Health Insurance is 18%.
No. Individuals cannot claim input tax credit (ITC) on GST paid for personal health insurance. ITC is only available under specific conditions to businesses.
No. Under Section 17(5) of the CGST Act, GST on employee health insurance is a blocked credit unless it’s mandated by law for the employer to provide such insurance.
Health insurance is considered a financial service, which is taxable under GST. Hence, insurers are legally required to collect 18% GST on premiums.
Yes. All health-related insurance products, including top-up, super top-up, and critical illness plans, are taxed at 18% GST.
Many government-sponsored health insurance schemes (like Ayushman Bharat) are exempt from GST. However, private health insurance policies are taxable at 18%.
