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As per regulation, Individual & Family Floater health insurance policies starting Sept 22, 2025, will have 0% GST. Choose a start date on or after this to avail the benefit.
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Direct tax is directly levied on an individual or organisation, while indirect tax can be transferred from one person or entity to another.
Though this is the basic difference between direct and indirect taxes, several other notable differences deserve attention. Understanding direct vs indirect taxes will help you identify your responsibilities as a taxpayer and ensure compliance when it is of utmost importance.
Here is a quick insight into the differences, direct vs indirect tax examples and everything you need to know.
Direct tax is a type of tax imposed directly by the government on an individual or business entity. The taxpayer is responsible for paying this tax to the government and cannot pass it on to another person or business entity.
Direct tax is charged on income or profits. Furthermore, it is progressive and increases based on the type and amount of income earned by the taxpayer.
In India, direct taxes are collected and governed by the Central Board of Direct Taxes (CBDT).
Indirect tax is a type of tax imposed by the government on goods and services and can be transferred from one taxpayer to another. For instance, a wholesaler of cosmetic products will transfer the responsibility of paying the tax to the retailer. Further, the retailer will pass it on to the end customer.
Therefore, the end customers are liable to pay the indirect tax applicable to the goods or services. Intermediaries, such as retailers, are responsible for collecting the tax from the consumers and then remitting it to the government.
In India, indirect taxes are collected and governed by the Central Board of Indirect Taxes and Customs (CBIC).
Differentiating Factors
Direct Tax
Indirect Tax
Tax Charge
Tax is imposed by the government on the individual or business entity.
Tax is imposed by the government on goods and services.
Transferability
Not applicable
It can be transferred from one taxpayer to another
Who is responsible to pay the tax?
The individual or the business entity must pay the tax directly to the government.
The end consumers of the goods and services are responsible for paying the tax.
Who is responsible for collecting the tax?
The tax is paid directly to the government by the individual or business entity.
It is collected by intermediaries, such as retailers, and paid to the government.
Examples
Income tax, corporate tax, capital gains tax
Goods and services tax, customs duty, tax imposed on petrol, diesel and alcohol
Administering Government Body
Central Board of Direct Taxes (CBDT)
Central Board of Indirect Taxes and Customs (CBIC)
Nature of tax
It depends on the income tax slabs and their corresponding tax rates. It is a progressive tax that increases with a higher level of income.
Not fixed or progressive. It is a regressive tax and depends on the types of goods and services, value addition and location.
Impact on cost of goods and services
Increases the overall price of the product.
Penalties
Taxpayers who refrain from or delay in paying direct taxes will be charged with a penalty.
No possibility of default, and hence, penalty charges are not applicable.
Income tax is charged on the income or profits earned by individuals or business entities during a financial year. It is calculated based on the income tax slabs and rates applicable to that particular financial year.
When paid by a business entity or company, it is referred to as corporate tax.
The government directly imposes capital gains tax on the profit or gain arising from the sale of a capital asset.
These can include land, residential property, jewellery and more. The tax is based on the investment tenure and is payable in the year the transaction occurs.
Securities transaction tax is charged on the sale or purchase of financial securities listed on authorised stock exchanges in India. It also applies to unlisted shares in an IPO that are subsequently listed on stock exchanges.
The tax is applicable to equities, units of equity-oriented mutual funds and derivatives and is charged on every transaction.
There are also other taxes, such as the property tax that is imposed on a property or land owner by the respective local government or municipal corporation. It includes any type of real estate property, such as residential properties and office buildings.
Goods and services tax is now the unified domestic indirect tax that replaced several previous indirect taxes in India, such as VAT, excise duty and services tax.
GST is imposed on goods and services and is calculated based on its type, composition and location at multiple stages. It is charged on every value addition throughout the supply chain.
It is an indirect tax levied on goods transported across international boundaries. It is determined by the origin of the goods and their composition.
Customs duty is charged on all imported goods and certain goods exported out of the country.
GST subsumed most of the indirect taxes applicable to a wide range of products. There are a few exceptions, such as the tax charged on petrol, diesel and alcohol.
GST
Income Tax
What is the type of tax?
What is the basis for the tax charge?
Charged on goods and services
Charged on income or gains
Who pays the tax?
The end consumer is responsible for paying the tax.
Individuals or business entities earning an income or generating profits need to pay income tax.
Who collects the tax?
Intermediaries, such as retailers, wholesalers or suppliers, are responsible for collecting the tax and paying it to the government.
It is directly paid by the taxpayer to the government.
Rate of tax
Differs based on the product, location and value addition.
Progressive and depends on the income tax slabs and their corresponding tax rate.
Legal Compliance
Businesses that exceed the threshold limit on the turnover need to register for the GST payments.
Individuals or businesses exceeding the minimum exemption limit must pay their income tax.
By ensuring the payment of applicable direct and indirect taxes, you help support various developmental initiatives in India. This includes essential services, such as education and infrastructure.
Tax payments fund the maintenance of essential public services, such as transport, sanitation and healthcare.
Paying taxes is legally mandatory. Non-compliance can result in high penalty charges.
The Income Tax Act 1961 provides various income tax exemptions and deductions to help you reduce your taxable income. Section 80C and Section 80D are the two common provisions used by salaried taxpayers.
While Section 80C provides tax deductions for the payments made for a wide range of savings and investment plans, Section 80D is exclusive to health insurance premium payments.
Section 80D provides a tax deduction* of up to ₹1 lakh for the health insurance premium paid for yourself, including your spouse and dependent children and parents.
Explore Reliance General Insurance and our health insurance policies online to secure financial support for your healthcare requirements while also saving on taxes.
GST (Goods and Services Tax) is fixed and charged on goods or services and is an indirect tax. It is based on the type and composition and varies across the different states in India.
Individuals and business entities earning an income or profits, which are taxable under the Income Tax Act 1961 are liable to pay direct taxes.
Direct taxes apply to income or capital gains earned and are paid directly by the taxpayer to the government. On the other hand, indirect taxes are charged on goods or services. End consumers pay them to retailers or wholesalers, who then remit them to the government’s account.
Customs duty is an indirect tax on goods transferred across international borders. It is charged on all imported goods and certain other products exported out of the country.
Corporate tax is a form of direct tax as it is charged on a business entity’s income.
TDS refers to Tax Deducted at Source. It is the process of deducting tax at the source by the payer when making a specific payment. It applies to salaries, interest amounts, rent, etc.
Tax Deducted at Source (TDS) is a form of direct tax. It is deducted directly from the source of income and paid to the government.
During the 56th GST Council Meeting in New Delhi, the Indian Government revealed a groundbreaking decision to exempt all health insurance policies from GST, starting September 22, 2025. The GST rate on health insurance premiums has been lowered to zero. Previously, premiums faced an 18% GST, which greatly raised the total cost.With this exemption, only the base premium is charged - making health insurance more affordable and accessible for individuals.
With Zero GST, your premium is now reduced by up to 18% compared to before.You won't have to pay tax on health insurance policies anymore.This change is effective for new purchases and renewals starting September 22, 2025.
Example: A policy that earlier cost ₹15,000 (including ₹2,288 GST) will now cost approximately ₹12,712 - saving you nearly ₹2,300
Yes, renewals made on or after September 22, 2025 will benefit from Zero GST.If your policy was issued before this date, GST still applies.The exemption is tied to the policy issuance and renewal date, not just payment.Future renewals will reflect the GST-free pricing, reducing your premium cost.
Yes, policies purchased or issued before September 22, 2025 still include 18% GST.The Zero GST exemption applies only to policies issued or renewed on or after that date.Future renewals will reflect the GST-free pricing.
Starting 22nd September 2025, the GST (Goods and Services Tax) on individual health insurance premiums has been reduced to 0%, down from the earlier rate of 18%.
What this means for you: Lower Premiums: You'll now pay only the base premium-no GST added.
Yes, Your Health Infinity renewal premium will decrease if the renewal takes place on or after September 22, 2025.
Yes, the new GST regulation effective from 22nd September 2025 applies to both new purchases and renewals of individual health insurance policies.
Yes, The GST exemption starting from 22nd September 2025 is applicable to health insurance plans such as Health Gain, Health Infinity, Super Top-Up, and Hospi Care. Provided that the policy is issued and the risk begins on or after this date, there will be no 18% GST charged on premiums. This change makes these plans more budget-friendly for both new purchases and renewals.
If your health insurance policy was renewed before September 22, 2025, and you paid GST, you are not eligible for any refunds or adjustments,The GST exemption applies only to transactions made on or after the effective date. Since your payment was completed earlier, the GST charged was valid under the previous tax rules and cannot be retrospectively refunded.
Disclaimers:
*T&C Apply. For more details on risk factors, terms conditions, brochure, and exclusions, please read the policy wording and CIS carefully before concluding a sale.
Tax benefits are subject to conditions under the Income Tax Act and amendments thereof. The tax laws are subject to amendments/changes from time to time. Please consult your tax advisor for details.
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