Many organisations choose to buy group health insurance policies. This refers to a master policy that the organisation usually pays premiums for, but which provides medical cover to employees. Sometimes, organisations also extend this cover to dependent relatives of the employees. In this article we cover tax deductibles in group health policies and how it can be beneficial to organization.
Group health insurance is gaining popularity in India as it provides affordable healthcare coverage for employees of small to large companies. It offers various benefits such as cashless treatment, maternity benefits, and pre-existing disease coverage. It also helps in attracting and retaining talented employees by providing them with essential health benefits.
Tax benefits of group health insurance
For organisations, an attractive feature of a corporate group health insurance plan is that they can report the premium as an expense, thus lowering the tax payable. For a company that pays corporate tax of about 30%, the effective reduction in tax is 30% of the premium. If you look at it another way, the effective health insurance premium for the company would be 70% of the premium.
However, this tax benefit is for the premium and only employers can claim tax deductions on them. Employees are only entitled to medical facilities and benefits. And to be eligible for these group health policy benefits, the employee should be in active employment.
Employees cannot claim tax exemption under the Income Tax Act for the premium amount that the employer pays. However, this is also not added to the employee’s taxable salary for tax calculation. If the employee pays premiums for life and health insurance policies for themselves and their families, these will be tax deductibles under group health policies.
Group health insurance was introduced in India to address the growing healthcare needs of employees. This offering provides a financial safety net, ensuring that employees have access to quality medical care. The rising cost of healthcare made it imperative for companies to provide comprehensive coverage as a part of their employee welfare programs. Group health insurance not only aids in attracting and retaining talent but also enhances employee productivity. The Employee State Insurance Act of 1948 laid the foundation for social security in India, with health insurance as a pivotal component. In essence, the sum assured in group health insurance plan provides comprehensive coverage for all employees, ensuring their well-being in times of medical need. It is a proactive approach to safeguarding the health and well-being of the nation’s workforce
With Group health insurance your can ensure your employees’ well-being. The network hospitals under group health plan provide comprehensive medical care, and our health cards grant easy access. Experience the convenience of cashless claims, making hospital visits hassle-free. Plus, our insurance covers health check ups, promoting preventive care. With us, you’ll never have to worry about room rent expenses. Prioritize your team’s health and security with our comprehensive Group Health Insurance plan, offering the advantages of a vast network of hospitals, cashless claims, coverage for health check-ups, and a stress-free room rent policy.
GHI for Small Businesses
Group Health Insurance for small enterprises is a valuable investment. Small businesses often operate as tight-knit groups, and ensuring the health and well-being of your team is crucial. These policies are designed to cover a group of people, including family members, providing a safety net for all.
One significant advantage is the reimbursement claim process. When employees need medical attention, they can file claims for expenses incurred, making healthcare affordable.
Another perk is the ability to purchase group insurance, often at more favorable rates than individual policies. This affordability is a significant benefit for small businesses that may have budget constraints.
However, it’s essential to understand the terms and conditions, including waiting periods and coverage limitations. Familiarizing yourself with the policy details ensures that your employees get the best care when needed. In summary, Group Health Insurance is a smart choice for small enterprises, fostering employee well-being and financial security.
Case study: Claiming tax benefit for group mediclaim policy
Jatin works with a startup called Slicetake. He is covered by his company’s group health insurance policy. Slicetake shows the group health insurance premium shared equally among all employees on their pay slips. The amount is in addition to the gross salary that Jatin earns.
While filing his IT returns, Jatin assumes that this premium payment in his salary slip will be eligible for tax deduction under section 80D. However, his tax advisor explains that he cannot include the premium for a group health insurance scheme in either his taxable income or eligible deductions.
Slicetake, on the other hand, has paid Rs 138,000 as corporate health insurance premiums for the previous fiscal year. The company registers the amount as an employee benefit expense in its financial statements. The company estimates its net profit after deducting this premium amount. This effectively lowers the tax that Slicetake has to pay.
Meanwhile, Jatin can claim a deduction under section 80D of the Income Tax Act, up to Rs 25,000, for the premium he paid on his individual policy. He can also claim an additional deduction of up to Rs 30,000 for the health insurance premium he paid for his parents since he bought the policies separately.
For more details visit: SecureNow’s Linkedin Page dedicated to Group Health Insurance.
Case study: Including claim paid as taxable income
Suraj Mehta, 27, is a junior editor at a reputed lifestyle publication. Last financial year, Suraj underwent a minor surgery, which required three days of hospitalisation. His employer has a group medical insurance policy in place which covered his medical expenses. Accordingly, Suraj received Rs 59,000 from the insurance company for the medical bills he had paid.
While filing his annual returns, Suraj, includes this amount as taxable income under ‘income from other sources (as he could not find another category that was suitable) and pays taxes accordingly.
Six months later, he receives reimbursement from the income tax department. He also receives a note of rectification. The note clarifies that medical reimbursements from health policies are non-taxable items. Since it is a small error and no information is missing, the income tax department does not ask Suraj to file a corrected return.
In conclusion, group health policies can indeed be tax-deductible in India, making them a win-win for both employers and employees. This tax benefit, governed by Section 80D of the Income Tax Act, encourages businesses to prioritize the health and well-being of their workforce. By offering group health insurance, employers not only ensure financial security for their employees but also avail of tax deductions on the premiums they pay.
For employees, this means comprehensive health coverage without the added burden of taxation. It’s a powerful incentive for organizations to invest in their employees’ health, fostering a healthier and more productive workforce.
However, it’s crucial to remember that the tax deductions have certain conditions and limits. The premium amount should be paid through non-cash methods, such as cheques or digital modes. Additionally, the maximum deduction limit is subject to the number of employees covered and the age of the insured.
So, while group health policies offer tax benefits, it’s essential for both employers and employees to be aware of the specific rules and guidelines to make the most of this advantageous arrangement. In the end, the tax deductions on group health insurance policies encourage a culture of well-being in the workplace, benefiting all parties involved.
About The Author
Mayank Sharma
MBA Finance
He is a professional who brings extensive knowledge and expertise to the field of group health insurance. He has dedicated 7years to helping individuals and businesses navigate the complexities of insurance. Having worked closely with numerous clients and insurance providers, he deeply understands the nuances of group health insurance policies. With a reputation for providing insightful and informative content, he leverages his industry experience to educate readers about the importance of group health insurance and its benefits. Through their articles, Mayank Sharma aims to empower individuals and businesses to make informed decisions about their healthcare coverage, ultimately promoting healthier and more secure communities.
