BACKGROUND & OBJECTIVES: The World Health Organisation recommended immediate initiation of antiretroviral therapy (ART) in all adult human immunodeficiency virus (HIV) patients regardless of their CD4 cell count. This study was undertaken to ascertain the cost-effectiveness of implementation of these guidelines in India. METHODS: A Markov model was developed to assess the lifetime costs and health outcomes of three scenarios for initiation of ART treatment at varying CD4 cell count <350/mm, <500/mm and test and treat using health system perspective using life-time horizon. A few input parameters for this model namely, transition probabilities from one stage to another stage of HIV and incidence rates of TB were calculated from the data of Centre of Excellence for HIV treatment and care, Chandigarh; whereas, other parameters were obtained from the published literature. Total HIV-related deaths averted, HIV infections averted and incremental cost-effectiveness ratio per quality adjusted life years (QALYs) gained were calculated. RESULT: Test and treat intervention slowed down the progression of disease and averted 18,386 HIV-related deaths, over lifetime horizon. It also averted 16,105 new HIV infections and saved 343,172 QALYs as compared to the strategy of starting ART at CD4 cell count of 500/mm. Incremental cost per QALY gained for the immediate initiation of ART as compared to ART at CD4 cell count of 500/mm and 350/mm was ₹ 46,599 and 80,050, respectively at reported rates of adherence to the therapy. INTERPRETATION & CONCLUSIONS: Immediate ART (test and treat) is highly cost-effective strategy over the past criteria of delayed therapy in India. Cost-effectiveness of this policy is largely because of reduction in the transmission of HIV.