India stands on the brink of a significant transformation regarding the tax implications of term life insurance premiums and health insurance premiums for senior citizens.
The GST Council is considering the possibility of exempting these essential categories from the Goods and Services Tax. This change could result in substantial savings for millions and encourage greater adoption of insurance, especially among the elderly and middle-income groups.
Currently, term life insurance premiums and all health insurance policies are subject to an 18% GST. However, this may soon be altered. A committee of ministers has proposed a total GST exemption for:
• Term life insurance premiums for all policyholders, regardless of age
• Health insurance premiums for senior citizens (defined as individuals over 60 years), with no cap on the sum insured
The financial benefit can be significant
For elderly individuals who spend ₹50,000 annually on health insurance, an 18% GST results in an additional ₹9,000. Lowering this tax reduces the cost of these policies. Furthermore, it represents a move towards perceiving insurance as a necessity rather than a luxury.
The projected annual impact on the government is approximately ₹2,600 crore—₹2,400 crore attributed to health insurance and ₹200 crore to term life insurance. The Council intends to counterbalance this through adjustments in GST categories.
What to anticipate?
Upon approval, the exemption will considerably lower the expenses associated with term life and senior health insurance. This long-anticipated action has the potential to encourage a greater number of individuals to obtain insurance and offer assistance to the growing elderly demographic in India.