When it comes to finding the right job, candidates, these days, not only look for a stable career and a high-paying job. But they also seek additional benefits that a company has to offer. One of the most look-after benefits that companies are offering and employees look for is nothing but “Group Health Insurance”. This type of insurance has tax implications under Section 80D and Section 17 of the Income Tax Act offered by the companies to attract and retain top talent. The best part is that it offers tax benefits to both employees and employers.
Group Health Insurance, also known as Group Mediclaim Policy, is a kind of health insurance offered by companies to offer pre and post-hospitalization coverage to employees and their benefits. With such benefits offered, employees don’t need to buy additional health insurance from a private company. However, it’s important to understand the taxability of medical insurance offered by the company or employer.
In this post, we’ll explore the taxability aspect of medical insurance paid by employers. But before that, let’s discuss its advantages and eligibility criteria.
Advantage of Group Health Cover for Employees
Group Health Coverage for employees offers several advantages. These are as follows;
- Comprehensive Health Coverage
One of the biggest benefits of Group Health Insurance is that it provides employees with wide-ranging health coverage at no cost. It generally includes hospitalization expenses, doctor consultations, diagnostic tests, medications, and surgical procedures. Furthermore, it helps employees to access necessary medical services without worrying about their finances.
- No waiting period
Another major benefit of group Mediclaim policy is that there is no waiting period for pre-existing diseases. In simple words, it can be said that employees can receive ample coverage for their existing health conditions. The moment employees opt for the group health plan, they and their families immediately get covered.
- Customisation with add-ons and top-ups
The third benefit on the list is that it offers the flexibility to customize the coverage with various add-ons and top-ups. These additional features allow employees to enhance their health insurance benefits according to their specific needs. Furthermore, employees have the choice to top-up to increase the coverage of their plan or consider add-ons to get extensive health coverage for diseases that they think will affect them in the future.
- Inclusion of parents
Though it depends, many group health insurance plans extend coverage to employees’ parents as well. If you’re an employee who may need to support the healthcare expenses of your ageing parents then it’s a good option for you. Remember that including parents in the coverage ensures that they have access to high-quality medical care.
- Cost-Effectiveness
Last but not least, group health coverage offered by companies is often more cost-effective compared to individual health insurance policies. The major reason behind this is that because the premiums are shared among a larger group of employees, the overall cost per person is reduced.
Which Employers Can Avail Tax Benefits? Know the Eligibility Criteria
Here is a list of the types of employers that are eligible to offer this kind of insurance are;
- Public Organizations
- Small & medium-scale enterprises (SMEs)
- Sole Proprietors
- Private Firms
- Partnership Firms
- Start-up Ventures
Classification of Tax Benefit of Group Medical Insurance for the Employer
Here is the list of the scenarios to consider along with their tax implications to understand whether your insurance premium is taxable or not.
| Scenarios | Tax Implications on Both Employees & Employers |
| The owner of the company pays the entire insurance premium. | In such a case, where the employer is paying for the group health insurance policy and providing coverage to employees free of cost, the tax benefits associated with the premium payment would typically be availed by the employer, not the employees. |
| The employer pays a huge portion of the premium amount and then the employee contributes a small portion. | In these kinds of cases, where the employer provides group health insurance coverage to contribute a significant portion of the premium then employees can claim tax deduction for the amount they pay towards the premium. |
| When the employer doesn’t pay the premium amount | In the case where the employer has not paid any amount to the group medical policy of the employee, then the employer has no right to claim any tax benefit. |
Frequently Asked Questions
Listed below is the list of frequently asked questions related to the tax on medical insurance by employers.
No, TDS is not a factor when determining an insurance premium.
Section 10(10D) of the Income Tax Act of 1961 exempts policyholders from paying taxes on medical insurance reimbursements.
The Income Tax Act’s Section 80D allows individuals and HUF to deduct up to Rs. 25,000 from their taxes for health insurance premiums paid within a certain fiscal year.
Before 2020 (pre-covid), there were strict requirements for providing corporate health insurance but now there are not so many restrictions. A startup, for instance, can also cover a staff of 20 people.
Yes, the plan can usually provide coverage for the employee’s immediate family members.
