In an organization setting where a group health insurance policy is offered by an employer to an employee, the tax benefits can be availed by the party who pays the insurance premium. In case both employer and employee contribute a part of the premium, then tax benefits can be availed by both parties depending on the proportion of premium contributed.
In many cases, the employer pays the entire premium amount for a group mediclaim policy. Here, no amount will be deducted from the employee’s salary as premium, and the premium amount will not be included in the employee’s taxable salary. Thus, the employee can’t avail any tax benefits while the employer is eligible for tax benefits as per the Income Tax Act, 1961. For the employer, such a tax benefit is often referred to as ‘employer entitlement’ under the IRDA.
Along with the employer, when an employee contributes towards the premium for a group health insurance policy, then the employee can avail tax benefit based on the contribution. As per company policies, the employer and employee may share the premium contribution. There are also cases where the employer pays the entire premium amount for a policy while the employee pays an additional premium to enhance the policy coverage. In both cases, the employee is eligible for tax benefits in proportion to the premium paid.
As per section 80D of the Income Tax Act in India, premium paid towards a health insurance policy is exempted from tax, the upper limit of the deductible being INR 25,000.
Case Study : Claiming Tax Benefits for Group Health Insurance Premium
Saket works in SurpriseMe, a startup for personalised and experiential gifting. As part of the benefits offered by his employer, he is covered under the group health insurance policy along with other employees at SurpriseMe. The premium is paid entirely by SurpriseMe and the amount is over and above Saket’s gross salary. Saket assumes that the premium payment towards the group health insurance policy indicated in his salary slip is eligible for tax deduction under section 80D and files the same during the time of investment declaration.
Saket’s tax advisor points out that he cannot consider this amount under section 80D since the premium amount has been borne by SurpriseMe. SurpriseMe pays an annual premium of INR 180,000 towards group health insurance for all its employees. The same amount is reduced as employee benefit expenses while calculating their net profit for the fiscal year, thus reducing the taxable amount for the company.
In the following fiscal year, Saket opted for an additional coverage under the group mediclaim policy to include his dependent spouse. This additional premium amount is borne by Saket and he can present the same as tax-deductible while filing his returns.
A group health insurance policy is a shared risk policy, and the greater the number of policyholders, the lower the premium amount since it is distributed equally among all the members. Moreover, based on the insurance provider, more policyholders under a health insurance plan could mean more benefits under the coverage.
Companies who can avail tax benefits by offering its employees a group mediclaim policy include:
Exceptions in the category include single entrepreneur companies, and coverage for spouses in family businesses with family members and non-family members covered under the same policy.
For employees who are in active employment, a group mediclaim policy facilitates basic healthcare coverage for themselves, and in some cases for their dependent family members too. Some of the advantages for employees from a group health insurance policy are:
Cover for procedures such as eye surgery, chemotherapy, etc. with less than 24-hour hospitalization
Option for family cover
Cover for pre-existing conditions and maternity expenses
Affordable premium for critical care and hospitalization
Feeling of security
In case of hospitalization of the individual who is covered under the group health insurance policy, the amount reimbursed for medical bills by the health insurance provider is non-taxable.
The following group health insurance plans are available for companies or corporates looking to avail a comprehensive policy for their employees:
Group Medical Coverage
As the world switches between the new normal and the old, healthcare has come into greater focus. The vulnerability of life and the dependence on medical assistance has never before been so profound. In such times of uncertainty, a group medical insurance cover is the ideal benefit that an employer can offer employees.
In addition to employees feeling cared for by their employer, it provides a sense of security and comfort. Moreover, the employer and employees stand to gain from tax benefits on the premium for the group health insurance policy based on their contribution.
With ICICI Lombard, choose customized group health insurance plans for your valued employees and avail the multiple benefits of our policy cover.
- Group Health Insurance
- Product Code: 4016
- Product UIN: ICIHLGP21381V05202