LIC GST Rate in 2026: What Every Policyholder Must Know

If you've ever looked at your LIC premium receipt and wondered why the total is higher than quoted, the answer is GST. The LIC GST rate has been a source of confusion for millions of policyholders across India — and in 2026, it changed dramatically.

Under GST Reforms 2.0, effective 22nd September 2025, the GST Council reduced the GST rate on most personal LIC insurance policies from 18% down to 0%. That's a substantial saving for individual policyholders. But the rules differ by plan type, and businesses need to understand the Input Tax Credit (ITC) rules separately.

This guide breaks it all down; policy by policy, with real examples so you know exactly where you stand.

What Is the Current LIC GST Rate Under GST Reforms 2.0?

The GST Council revised the LIC GST rate to 0% for personal life insurance policies, effective 22nd September 2025. 

The 0% exemption applies to all LIC policies issued for personal use, including:

• Term life insurance (including LIC Yuva Term Plan)
• Endowment policies
• Unit Linked Insurance Plans (ULIPs)
• Traditional life insurance plans
• Reinsurance on any of the above

This reform directly reduces the cost of holding life cover for crores of Indian families. To verify the GST component on your next premium notice, use Munim's free GST Calculator.

GST on LIC Term Plans

Term plans are the most straightforward form of life insurance — pure coverage, no savings component. Before GST Reforms 2.0, the GST on LIC premium for term plans was a flat 18%.

After 22nd September 2025: The applicable rate is 0%.

Example:

If your renewed term plan still shows 18% GST in the premium notice, contact your LIC branch or agent immediately to request a corrected invoice.

GST on LIC Endowment Plans

Endowment plans combine life cover with a savings or maturity benefit. The LIC premium GST rate for endowment plans previously followed a tiered structure:

• Year 1: 4.5% GST
• Year 2 onward: 2.25% GST

After 22nd September 2025: The rate is 0% for all years.

Example:

GST on LIC Pension Plans and Annuities

Pension plans had the most complex GST structure before the reforms:

• Regular premium pension plans: 4.5% in Year 1, then 2.25% from Year 2
• Single premium annuities: 18% GST on 10% of the total premium (effective rate: 1.8%)

After 22nd September 2025: GST on all LIC pension plans and annuities is 0%.

Example (Single Premium Annuity):

If you're building retirement income through a LIC annuity, this reform improves your net effective return from Day 1. For an overview of broader changes to the indirect tax landscape, read Munim's analysis on next-gen GST reforms.

GST on LIC Unit Linked Insurance Plans (ULIPs)

ULIPs are hybrid products—they combine market-linked investment with life insurance cover. Because of this, only the insurance portion of the premium attracts GST, not the investment component.

Before the reforms, the insurance component of a ULIP premium attracted 18% GST.

After September 22, 2025, the rate is 0%.

Example:

If you track ULIPs as part of employee benefits or business investments, Munim's expense tracking software makes it easy to record and categorize these payments without manual effort.

GST on LIC Health Insurance Plans

GST rates on health insurance premiums were among the most debated in GST reform discussions. Before the changes, both LIC and private health insurers charged 18% GST — a burden that discouraged many from buying adequate coverage.

After 22nd September 2025: Health insurance premiums attract 0% GST.

Example:

This aligns with the government's broader goal of making health coverage financially accessible for every Indian household.

LIC GST Rate by Policy Type — Quick Comparison

Here's a consolidated view of how the LIC premium GST rate changed across all major plan types:

You can verify the tax component on any existing premium notice using our GST Calculator — it takes seconds.

Can Businesses Claim ITC on GST Paid on LIC Premiums?

This is one of the most frequently asked questions — and the answer depends on who is paying and what the policy covers.

For individual policyholders:

You cannot claim Input Tax Credit (ITC) on GST paid on personal LIC premiums. Since the rate is now 0%, this is largely academic for new policies — but worth knowing for older policies still under the pre-reform rate.

For businesses:

Section 17(5) of the CGST Act blocks ITC on life and health insurance in most situations. The exceptions are:

• The employer is paying the premium on behalf of employees and it is legally mandated under applicable labour laws (e.g., the Employees' Compensation Act)
• The insurance covers business assets (such as vehicles or factory equipment)

Group health or life insurance plans taken voluntarily — without any statutory requirement — do not qualify for ITC.

If you're a business owner managing GST credits and return filing, Munim's GST return filing software handles ITC reconciliation accurately, so you never over-claim or miss eligible credits.

How to Read the GST Component on Your LIC Premium Notice

When you receive a premium notice or payment receipt, check for three things:

1. Base premium — the core cost of your insurance
2. GST component — should now show 0% for personal policies post-September 22, 2025
3. Total payable — should equal the base premium with no additional tax for policies renewed after the reform date

If your notice still reflects the old GST rate, raise a correction request with your LIC agent or branch before making the payment. 

Closing Note

The reduction of the LIC GST rate to 0% is one of the most meaningful reliefs for individual policyholders in recent years. Whether you hold a term plan, an endowment policy, a ULIP, or a health plan, your effective premium cost is now lower and the calculation simpler.

For business owners and self-employed professionals, understanding GST on LIC premium and the ITC rules remains essential for correct tax planning, accurate books, and compliant returns.

Frequently Asked Questions on GST Rate on LIC Premium

1. What is the current LIC GST rate? 

After GST Reforms 2.0 (effective 22nd September 2025), the LIC GST rate is 0% for all personal insurance policies — including term, endowment, ULIP, pension, and health plans.

2. Does the 0% GST apply to old LIC policies? 

The 0% rate applies to premiums paid after September 22, 2025. If you paid your premium before this date, the earlier rate (ranging from 2.25% to 18% depending on plan type) would have applied.

3. Can I claim input tax credit on GST paid on LIC premiums? 

Individual policyholders cannot claim ITC. Businesses may claim ITC only if the insurance is legally mandated for employees or covers business assets — not for voluntary group health or life plans.

4. What is the GST rate on health insurance in India now? 

Under the September 2025 reforms, health insurance premiums attract 0% GST.

5. Can a business claim ITC on car insurance? 

Generally, no. Car insurance for personal use is blocked under Section 17(5) of the CGST Act. For commercial vehicles used in the course of business, consult your chartered accountant for specific eligibility.

About the author

Mehul Jagwani

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Mehul is a seasoned content writer with a passion for simplifying complex accounting and GST topics. With a keen interest in entrepreneurship and business management, he specializes in creating informative and engaging content for themunim.com. His goal is to help businesses understand and implement accounting and GST software solutions effectively. When he's not crafting content, Mehul enjoys exploring new places and spending time with his Golden Retriever.