Individual life and health insurance is now GST-free: What it means for your savings

Starting today, individual life and health insurance policies will be exempt from Goods and Services Tax (GST), making premiums more affordable for policyholders. Until now, these insurance services attracted an 18% GST, significantly increasing the total cost.

The policies covered under the exemption recommended on health insurance are all individual health insurance policies including family floater plans and senior citizen policies and the reinsurance services thereof.

The policies covered under the exemption recommended on life insurance are all individual life insurance policies including term, ULIP, and endowment plans and reinsurance services thereof.

"Now with GST payouts, insurance products and financial products are within reach, critical life and health insurance policies are tax exempt, and medicines and medical devices are more affordable. This moves personal finance beyond just savings and tax-hedging, toward confident, long-term investing in health and security ," said Siddharth Maurya, Founder & Managing Director, Vibhavangal Anukulakara Pvt. Ltd.

Families can use their savings, thanks to lower indirect taxes, to spend more on recovery and prevention and future planning, breaking the back of hidden costs. For the middle class, a reflection of financial inclusion at its best,; where every rupee earned and saved goes directly into ones account, one where opportunity becomes tangible; one where aspiration is met with support and one where security against ill health and old age is now finally a power bestowed on the power of policy," added Maurya.

How much policyholders will save since life, health insurance to be GST free from today

Instead of letting that ₹9,000 go unutilised, policyholders can turn this tax saving into an opportunity to build long-term wealth. By starting a Systematic Investment Plan (SIP) of ₹9,000 per year (just ₹750 per month) in a mutual fund with an average return of 12% per annum, one could accumulate over ₹2.8 lakh in 15 years. Stretch that to 20 years, and the value grows to around ₹5.2 lakh, and this all from money that would have otherwise gone to taxes.