Tax Benefit of Group Health Insurance for Employers & Employees

  • Author :
  • TATA AIG Team
  • Published on :
  • 14/03/2024

With the healthcare industry booming in India, the financial liabilities for individuals are rising to new heights as medical costs have increased significantly. Thus, the decision to invest in a health insurance policy is more of a need than a luxury.

When we talk about the corporate environment in the country, the requirements of the new-age employees are no longer limited to job satisfaction. They are keen on employers that offer added benefits like group health insurance or critical illness insurance.

Other than the financial support to take on medical expenses, group health insurance plans also offer various tax benefits for all involved.

Let us understand all about group health insurance and the employer-employee insurance tax benefits in detail below.

What is Group Health Insurance Policy?

Group health insurance is a health insurance policy purchased by a company or employer to provide extensive medical coverage to a group of employees and their dependents. The policy is designed to provide employees with financial assistance in times of need.

This policy is commonly added to the overall benefits received by an employee upon joining a company. Employers can opt for small or large business group health insurance plans based on team size and other criteria.

Benefits of Group Health Insurance for Employee Employer

Better Employee Retention for Employers - One of the primary benefits of buying a group health insurance as an employer is employee retention. As mentioned earlier, employees are constantly looking for job opportunities that offer more than just a promising package.

With a group health insurance policy, employees are provided medical coverage without exhausting their personal finances. This not only motivates the employee to continue working but also increases the overall company efficiency.

Broader Coverage - Individual health insurance plans might not cover all the necessary coverage or might charge expensive premiums for extensive coverage. However, when an employer buys a group health insurance policy for the employees, they get more affordable premium rates with more benefits and broader coverage.

Tax Benefits - A significant advantage of a group health insurance policy is tax benefits for both the employee and employer. This benefit is available based on the premium payment terms and other specific details of the policy.

Employer Employee Insurance Tax Benefits

Tax Benefits for Salaried Employees

When it comes to the income tax benefits for salaried employees within a group health insurance policy, it is necessary to understand the different case scenarios wherein tax benefits will be applicable. Let us understand this in detail below.

Partial Premium Payment - In case one, if the employer and employee share the payment against the group insurance policy premium, the employee can benefit from a tax deduction on the percentage of the premium they pay. As per Section 80D of the Income Tax Act, 1961, a tax deduction of up to ₹25,000 on the yearly premium payment is allowed.

Entire Premium Payment - In case two, if the employee is paying the entire premium for the group health insurance policy, he/she can avail the same benefit of tax deduction of up to ₹25,000 on the yearly premium payment under Section 80D.

No Premium Payment - In case 3, if the employer is paying for the entire premium but the employee wants to increase coverage using add-ons, the tax deduction of ₹25,000 on the yearly premium payment will be applicable only on the add-on premium value.

Moreover, as the employee gets free health insurance from the employer, they have no tax implications, increasing their savings for the future.

Employer Tax Benefits for Health Insurance

Along with the employees, the employer tax benefits for health insurance are also based on the premium payments. Let us understand this in detail below.

Full Premium Payment - If an employer pays the entire premium for all the employees for a group health insurance, it can be accounted as a business expense as part of employee benefits. This reduces the taxable income for the employer under Section 37(1) of the Income Tax Act, 1961, which in turn decreases their tax liability.

Partial Premium Payment - If the employer and employee share the premium payment, the employer can only avail of tax exemption for the amount paid by them and not the entire premium value.

Tax Benefits for Self-Employed in India

For self-employed individuals, the tax benefits for payment against a health insurance premium are the same under Section 80D of the Income Tax Act. They can avail of a tax deduction of up to ₹25,000 on the yearly premiums.

Additionally, it is essential to note that the ₹25,000 limit is for self or family members of age below 60, and ₹50,000 is the limit for self or family members of age above 60 years.

Buy Tata AIG Group Health Insurance Policy

To help the employees navigate the increasing health and medical expenses along with their changing needs from employers, investing in a group health insurance policy is highly recommended.

Tata AIG offers a variety of plans under employer health insurance to provide employers with affordable plans and broader coverage options for their employees. The plans include coverage for in-patient treatments, maternity cover, organ transplants, daycare procedures and more.

Regardless of the company size, investment in insurance for corporations can increase overall employee productivity and attract various tax benefits. Visit our website to learn more about the available group insurance plans.

Conclusion

Today, employers are looking for ways to extend maximum employee benefits for their team members. The employee benefits are not limited to just holidays, working flexibility, etc. It further extends to health insurance support.

Moreover, with the option of tax deductions and exemptions for group health insurance for both employees and employers, there is no reason to wait. Evaluate the different plans available and secure your employees’ futures the right way.

FAQS

What is the minimum number of employees that need to be covered under a group health insurance?

As per IRDAI, a minimum number of at least 7 employees need to be present within the organisation to obtain a group health insurance policy. Some policies require a minimum of 10 employees. Thus, always read the terms and conditions of insurance plans before applying.

Is group health insurance mandatory in India?

As per the new order from the Government of India, IRDAI, and Ministry of Home Affairs, it has now become mandatory for employers to provide corporate health insurance to all their employees. However, there might be certain specifications and exceptions, so always check on the official websites.

What are some additional benefits of group health insurance for employees?

Employees get added coverage for pre-existing conditions, reduced healthcare expenses, free of cost or lower premiums for health insurance, added peace of mind, and many more.

Disclaimer / TnC

Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.

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