ABSTRACT: Transformers are essential component of electrical power system. It plays major role in transmission and distribution of electrical power. Transformers installed in the power systems have to withstand overvoltage apart from its continuous operating voltage. This Surge voltage arises in the system either by switching operations of heavy load or by   lightning strokes. Surge voltage can cause significant failure of transformer and power system if sufficient protection has not been provided. External rod gaps and surge arresters are connected across transformer bushing for its protection against lightning over voltage. Metal oxide surge arresters (MOSA) are connected across each phase terminal. As per voltage rating of transformer its Basic Insulation Level (BIL) has been defined. Ideally, transformer insulation supposed to withstand over voltage below its BIL.  Residual voltage of MOSA is responsible to maintained the voltage level much below the BIL of Transformer. Hence, Voltage rating of MOSA, length of connection lead from transformer bushing terminal as well as its location plays major role for protection during over voltage conditions. At the time of designing transformer insulation, required BIL, MOSA ratings and its operating voltage are considered. However, performance of transformer insulation is largely depends on ratings of   surge arrester connected, location of surge arrester, margin considered in insulation design, quantity of surge voltage strike, etc.   This paper demonstrate the role of Surge arresters for protection of transformer against lightning over voltage, transformer insulation design, optimum  location of surge arresters and effect of its connection lead length,    protection margin and methods of protection of transformers against surge voltages  have been discussed in detail.