The long-pending issue of tax relief on life and health insurance premiums is likely to be discussed in the upcoming GST Council meeting. According to reports, the Group of Ministers (GoM) constituted on insurance matters may recommend full GST exemption on life insurance and health insurance policies of senior citizens, reiterating its previous recommendations.
Ahead of this meeting, the final comments of insurance regulator IRDAI have also been sent to the council, which were sought in the December 2024 meeting and which are being considered important in this decision.
Also read: GST Council Meet coming up: Relief on life and health insurance premiums likely on agenda
Tax exemption likely on health insurance up to Rs 5 lakh
An important suggestion in the recommendations of the Group of Ministers is – health insurance plans up to Rs 5 lakh should be completely exempted from GST. This proposal is considered a big relief step for the general public, especially the middle and lower income groups. Currently, 18% GST is levied on health and life insurance, which makes the premiums expensive.
Hannut Mehta, CEO and co-founder of Bimapay Finsure, says:
“Removing GST on health policies up to Rs 5 lakh can make health insurance more accessible to crores of families in India. This can lead to a rapid increase in the number of first-time insurance buyers in tier-2 and tier-3 cities. This is a move that will not only increase new buyers but will also improve the retention of existing policyholders.”
He also added that this move will also open the way for the insurance industry to create simple and affordable plans, which will boost insurance coverage across the country.
Also read: Tax on insurance likely to be cut to 5% at GST Council meet
GST relief for term life insurance for senior citizens?
At the same time, the suggestion to remove GST on term life insurance premium for senior citizens is also included in the recommendations of the Group of Ministers.
According to Hanut Mehta: “Making life insurance accessible to India’s elderly population is one of the biggest needs of today. For people above 60 years of age, the 18% GST on term insurance significantly increases their premium cost, making it impossible for many people to buy insurance. Removing the tax will be a big step towards providing financial security to this class.”
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