Tax Benefits on Group Health Insurance

Everything You Need to Know About Tax Benefits on Group Health Insurance for Employers and Employees

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Employees are indeed the pillars of any company. Thus, companies all over the world are continuously battling to hire the greatest individuals. Employers offer best-in-class perks and competitive wages to attract the best employees. Paid vacations, non-monetary gifts, team outings, and other perks are among these perks. While these advantages are exceptional, businesses can provide employees with essential benefits such as proper health insurance coverage.

Employee Insurance Benefits

Employees will feel safer if they have health insurance, and they will be more driven to achieve long-term corporate goals. Not to mention, they would feel like the company care for them and would be motivated to help the organization grow. However, tax benefits on group health insurance are frequently misunderstood by both businesses and employees.

Section 80D Deduction for Health Insurance Premium

Individuals can deduct their health insurance premiums under Section 80D of the Income Tax Act. Individuals can claim up to Rs 25,000 reduction on their taxable income for insurance premiums paid for themselves, their spouse, and their dependent children.

They could also seek an additional deduction of an amount of Rs 25,000 for their parents’ health insurance when they’re under the age of 60. The deduction advantage rises to Rs 50,000 for parents above the age of 60. The optimum deduction allowable within this section is Rs 1 lakh when both individuals and the parents are 60 years old or older.

Tax Benefits on Group Health Insurance for Employers

Employers are entitled to claim the total premium amount and receive a tax credit if they pay the complete premium on behalf of their employees.

To put it another way, the premium paid for group health insurance policies is an advantage provided to employees that could be used to claim a tax deduction. Under their Profit & Loss account, they could claim the entire premium as a business cost.

Tax Benefits on Group Health Insurance

Whenever the employer is paying the group health insurance premium to cover the employees, it is considered a business expense. Such expense must be recorded in the company’s ‘profile as well as loss account,’ post which it is regarded tax-deductible under the Income-tax Act of 1961.

The tax benefit obtained from group health insurance is termed ’employer entitlement’ under India’s Insurance Regulatory and Development Authority (IRDAI) Act, 1999. If both the company and the employee contribute to the group health insurance costs, the tax credit would be split equally.

Which Employers Are Eligible for Tax Breaks?

The following is the list of businesses that can gain financially by providing group health insurance to their employees:

  • Entrepreneurial enterprises
  • Companies that are privately owned
  • A sole proprietorship partnership
  • Companies that are publicly traded
  • Micro, small, and medium-sized businesses

Employers should provide group health insurance for a variety of reasons. Employers should purchase a group health insurance plan for their employees, whether they are a small business or a large corporation, to provide comprehensive hospitalization coverage, preventive health care coverage, as well as wellness benefits. This acts in the company’s favor because it makes the person feel valued.

Tax Benefits on Group Health Insurance for Employees

Employees might get advantage from the tax benefits on group health insurance. Employees may, nevertheless, be eligible for tax benefits within section 80D of the Income Tax Act of 1961, only if they are paying the premiums for it. It is important to remember that the tax benefit changes depending on the percentage of the premium paid by the employee.

Employee Benefits for Group Insurance

Tax benefits on group health insurance aside, a corporate cover is now an integral part of the employee experience and work culture.

Here are a few reasons why your organization should consider investing in a group health cover, even if you are strained for budgets.

Affordability

Compared to family health insurance, individual and group health insurance is more affordable for policyholders since the premium is divided by a group of employees. And in most cases, the employees are not even paying for it.

Affordable Group Health Insurance

Employees Feel Appreciated

Whenever a company provides group health insurance to its employees, they feel valued. As a result, their performance rises, and they are more likely to remain loyal to the organization.

More People – More Benefits

Policyholders might join a larger group to gain better and more comprehensive coverage from group health insurance. Better coverage for hospitalization costs, pre-existing conditions, and other benefits may be part of the higher advantage.

Employees’ Families Are Covered

Employees' Families Group Insurance Covered

There are several group health insurance policies that include coverage for employees’ family members. It protects the employee’s dependents by giving financial assistance in times of need.

Easier Claims Processing

Compared to other health plans, obtaining a claim form for group health insurance is simpler. The sole need on the part of the employees is that they submit the proper bills. Because the plan covers a significant number of employees, the employer guarantees that the insurer authorizes the claim request. This package also includes a cashless payment option.

Easier Claims Process

Let’s look at the tax implications of group health insurance premiums for employees in various circumstances.

3 Scenarios for Tax Benefits on Group Health Insurance for Employers and Employees

Scenario 1

Whenever an employee is responsible for a portion of the insurance premium. In this case, the employee can deduct the amount contributed as a tax deduction within section 80D of the Internal Revenue Code. The tax benefit, though, must not surpass Rs 1 lakh per financial year.

Scenario 2

An employee is responsible for the entire insurance premium. If the sum does not surpass the deduction of Rs 1 lakh, the employee may claim the entire value as a tax deduction under Section 80D.

Scenario 3

In this case, the employer is responsible for the entire insurance premium. The employee is not entitled to any tax benefits on group health insurance for the premiums paid on their behalf by their employer.

Conclusion

Employers and employees can benefit from group health insurance. But, it should not be mistaken as a way to save money on taxes since the plan also has certain additional equally important benefits. Furthermore, because the rising cost of medical care in India is not concealed from everyone, group health insurance functions as a barrier to protect against any unforeseen circumstances.

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