Insurance attracts 18% GST

The 18% GST on health and life insurance premiums is typically imposed by the government as part of the Goods and Services Tax (GST) or other tax regulations. This tax is applied to insurance premiums as they are considered a service provided by insurance companies. The tax revenue collected from these premiums helps fund various government programs and services. It is important to check with your local tax regulations to understand the specific reasons and implications of the tax on health and life insurance in your region.

What was the tax (GST) previously?

The tax on life insurance premiums in India was previously 15% before the government increased it to 18% in the Union Budget of 2021. This change came into effect on April 1, 2021.

Income Tax Exemption on Health and Life Insurance:

Income tax exemption on life and health insurance premiums was introduced in India under Section 80D and Section 10(10D) of the Income Tax Act, 1961. Section 80D provides tax benefits on health insurance premiums, while Section 10(10D) provides tax benefits on the maturity amount or death benefit received from life insurance policies. These provisions were introduced to encourage individuals to secure their health and life through insurance and to provide tax relief on the premiums paid and benefits received.

Income Tax Exemption Limits (Old Tax Regime):

Section 80D : 

1. Individuals:

    - ₹25,000 (self, spouse, and dependent children)

    - ₹50,000 (additional deduction for parents, if senior citizens)

2. Senior Citizens:

    - ₹50,000 (self, spouse, and dependent children)

3. Super Senior Citizens (above 80 years):

    - ₹100,000 (medical expenses, including health insurance premiums)

Section 10(10D) : provides tax exemption on life insurance maturity proceeds, including sums received under a life insurance policy.

No Exemption limit: Exemption is available on the entire maturity proceeds, provided the policy was issued

Conditions for Exemption:

1. Policy issued on or after April 1, 2003
2. Premium paid does not exceed 10% of the sum assured
3. Policy must be for a minimum term of 5 years (for policies issued before 1st Apr 2012) or 2/3rd of policy term (for policies issued on or after 1st Apr 2012)

Eligible Policies:

• Life insurance policies
• Endowment policies
• Money-back policies
• Unit-linked insurance plans (ULIPs)

• Term insurance policies (if maturity benefit is payable) 

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Best Term Insurance Policies for 2025 in India

• Max Life Smart Secure Plus
• Tata AIA Maha Raksha Supreme
• Bajaj Allianz Smart Protect Goal
• ICICI Prudential iProtect Smart

Thanks,

Honvest Team.