Are Group Health Insurance Premiums Tax Deductible?
- Author :
- TATA AIG Team
- ●
- Last Updated On :
- 16/10/2024
Much emphasis has been placed on the health and well-being of the employees, as they are a crucial part of a company's success. Many organisations are implementing various strategies to ensure their staff's welfare. One significant strategy is the implementation of a group mediclaim policy or group health insurance.
It is one of the most effective ways to protect employee health and offer them medical assistance in times of need. When an employer opts for a medical insurance policy for employees, it benefits both the employees and the employer.
Read on to find out how group medical insurance is beneficial for both!
What is a Group Medical Insurance Policy?
Group medical insurance is an insurance policy that covers members of an organisation or company employees. It offers financial assistance to employees in times of medical emergencies. It covers all the medical expenditures of the insured (employees), such as hospitalisation charges, medical treatment, and so on.
In some cases, group insurance also covers employees' dependents, such as spouses, kids, etc. While employees enjoy medical coverage, employers can also benefit from group health insurance, as the premium is a deductible expense under the Income Tax rules.
Benefits of Employer-Paid Health Insurance for Employer
Income Tax Benefit
According to the Income Tax rules, the employer can claim the insurance premium as a deduction under section 80D. Therefore, the most significant benefit for employers is that the health insurance premiums are tax-deductible expenses, allowing them to reduce their taxes. The medical insurance premium 80D limit is up to ₹25,000.
Many organisations these days provide group mediclaim policy to their employees as a part of their job benefit. For employers, group health insurance is an expense and is known as ‘profit in lieu of salary.’
The group health insurance premium is not just an expense but also a strategic investment that an employer makes for his employees, which is recorded in the profit and loss account.
According to the Insurance Regulatory and Development Authority Act 1999, the tax benefits of group insurance premiums are considered as ‘employer entitlement.’
Other Benefits
While the tax deduction is a significant benefit of group health insurance for employers, there are some other benefits that an employer can enjoy.
Increases Employee Productivity: When an employer provides medical coverage to the employees, they feel valued in the organisation. It fosters a feeling of being protected, and the employee is motivated to contribute to the organisation.
Therefore, employee productivity increases, and it benefits the employer as the company performs well.
Increases Employee Loyalty: Group insurance fosters a feeling of protection among the employees. They know that the employer cares for them, and this makes them loyal to the organisation.
Reduces Employee Absenteeism: Employees protected by group medical insurance policy receive the best medical treatment when they are unwell. It helps them get better soon, reducing absenteeism from the workplace.
Health insurance plans also provide annual health checkups, which ensure that the employees are in the best health, enabling them to report to work regularly.
Enhances Goodwill: Employers who protect and care for their employees' well-being establish a positive image among the workforce and in the industry. This, in turn, enhances the employer's and company's goodwill.
Employers Eligible for Group Health Insurance Tax Benefits
The following employers are eligible to avail medical insurance premiums tax deductible benefits:**
Start-up companies
Sole proprietorship
Public companies
Private companies
Partnership firms
Micro, Small, and Medium Enterprises (MSMEs)
Tax Benefits of Group Insurance for Employees
Generally speaking, the employer pays the premium for group health insurance. Hence, he is eligible to claim a tax deduction of the amount he pays. However, in many cases, even the employees contribute to the premium.
When an employee contributes to the premium of group health insurance, he is also entitled to claim a tax deduction as per the Income Tax Act. Employees can avail a deduction of up to ₹25,000 in a year towards premiums for health insurance. If the contribution includes coverage for senior citizens such as their parents, the deduction can be up to ₹50,000.
Other Benefits of Group Insurance for Employees:
Comprehensive Coverage: Whether it is a group insurance scheme for government employees or private employees, it offers comprehensive coverage to the insured. It covers maternity benefits, doctor visits, hospitalisation expenses, and much more.
Affordable: When you look at the group insurance scheme calculation, it is more affordable than other plans. Therefore, employees can benefit from reduced premiums.
No waiting Period: Group health insurance plans cover pre-existing diseases from day one, and there is no waiting period.
Coverage for Family Members: Employees also get coverage for their family members, such as spouses, children, and dependent parents. Thus, they are not required to purchase a separate policy for them.
Conclusion
Increasing stress and a sedentary lifestyle have shifted the focus on healthcare more than ever before. Since employees are the building blocks of an organisation, their health and well-being are significantly important.
One way employers can care for their employees is by providing them with group health insurance. It provides them with financial assistance when they need medical care.
Group insurance not only protects employee health but also makes them feel valued by the employer, which enhances their mental well-being, too.
Besides, employers can also benefit from tax deductions under section 80D, enhanced goodwill, better employee retention, etc. Therefore, group health insurance is a win-win for employers and employees.
Employers looking for business insurance in India can consider health insurance plans offered by Tata AIG. These plans offer benefits such as in-patient treatment, member additions, daycare procedures, cashless claims, and more. Whether you are a start-up or a large organisation, Tata AIG plans are customised to fit your requirements adequately.
FAQS
What is the eligibility for buying a group medical insurance policy?
According to the IRDAI regulations, any organisation with a minimum of 20 members can buy group insurance. However, the number of members also depends on the insurance provider, the terms of the policy, and other factors.
Can an employee claim a deduction u/s 80D of the premium paid by the employer?
No, an employee cannot claim a deduction of the employer's premium. He is only eligible to claim a deduction if he also contributes to the group insurance premium.
What are the factors to be considered while choosing a group insurance?
Employers must consider the following factors:
Extent of coverage
The option to include add-ons
Claim settlement ratio of the provider
Availability of cashless claim facility
Option to add or remove the insured’s family members
Disclaimer / TnC
Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.
Related Articles
