Discover how GST exemption on life and health insurance premiums makes protection affordable for NRIs and Indian residents. Learn benefits, tax impact, and planning strategies.
Table of Contents
Why GST Exemption on Insurance Premiums Matters
The Government of India has recently announced the exemption of GST on life and health insurance premiums, a move that will directly benefit both Residents and NRIs. For years, insurance buyers paid an additional 18% GST on their premiums, making protection costlier. Now, with GST removed, both term insurance and health insurance products become more affordable, improving financial security for families. For NRIs, who often buy insurance in India to secure dependents or manage cross-border risks, this exemption adds an extra layer of savings and value.
Pain Points Before GST Exemption
Until now, policyholders faced multiple challenges:
- High premiums due to GST addition (18% extra cost burden)
- Reduced affordability for families purchasing long-term health or term cover
- Lower adoption among young professionals and NRIs securing parents in India
- Strain on financial planning, especially for HNIs purchasing large cover amounts
Benefits of GST Exemption for Residents & NRIs
For Residents (India-based clients):
- Affordable premiums mean higher adoption of health and term insurance
- Better access to investment-linked insurance products (ULIPs, endowment plans)
- Encouragement to secure long-term health coverage
For NRIs (cross-border clients):
- Lower costs on policies purchased for dependents in India
- Opportunity to combine tax-free returns (GIFT City investments) with affordable insurance
- Greater peace of mind knowing family protection is cost-effective
How Much You Save After GST Exemption
Before GST Exemption: Annual Term Insurance Premium = ₹50,000 + 18% GST = ₹59,000
After GST Exemption: Annual Term Insurance Premium = ₹50,000 (flat)
Direct Savings = ₹9,000 annually or ₹90,000 over 10 years. This saving can be reinvested into mutual funds, bonds, or retirement planning.
Factors That Impact Insurance Planning for NRIs & Residents
- Family Dependents – Whether coverage is for spouse, children, or parents in India
- Health Inflation – Medical costs rising 8–10% annually
- Investment vs. Protection Mix – Balancing term insurance with investment-linked plans
- Cross-Border Taxation – NRIs must structure policies in line with DTAA (Double Tax Avoidance Agreement)
- Repatriation Needs – Insurance maturity benefits may need NRE/NRO account integration
Tax & Wealth Planning Strategies Post-GST Exemption
- Residents: Use saved premium costs to increase SIP contributions or emergency health funds
- NRIs: Secure term insurance in India (lower premiums and dependents covered locally), invest in GIFT City bonds, PMS, AIFs for tax-efficient growth, and leverage ULIPs for long-term planning, now more cost-efficient post-GST
FAQs on GST-Free Insurance Premiums
Q: Which insurance products get GST exemption?
A: Both life insurance (term, ULIPs, endowment) and health insurance.
Q: Does this apply to NRIs buying insurance in India?
A: Yes, GST exemption benefits apply universally, including policies purchased by NRIs.
Q: Will existing policies also benefit?
A: New premium payments under ongoing policies will now be GST-free.
Q: Should NRIs still buy insurance in their host country?
A: For global coverage, yes, but Indian policies are crucial for family protection in India.
Final Thoughts: Affordable Protection, Smarter Planning
The GST exemption on life and health insurance premiums is more than just a cost-cutting move. It is a policy shift that makes financial protection accessible, encourages adoption, and helps both NRIs and residents strengthen their wealth planning. By reinvesting savings into retirement funds, GIFT City products, or mutual funds, individuals can enjoy higher returns, stronger security, and true peace of mind.
Need expert guidance on retirement planning, cross-border tax strategies, and insurance planning? Write to globalnriadvisor@gmail.com to book a one-on-one consultation today.
Related Posts You May Like: