Employee retention strategy '23 ebook - Limited free downloads

Tax Benefits of Group Health Insurance for Employers and Employees

What are the tax benefits for employees and employers under Section 80D and Section 17? How much tax deduction can be claimed? Advantages of..

Group Health Insurance

Companies and firms across the world aim to recruit the top talent available in the market. To engineer that, employers provide competitive pay and an amazing corporate wellness program. One of the most popular employee benefits is Group Health Insurance.

Also read: Guide to Group Health Insurance

Employers can provide employee benefits insurance to all their employees with Group Health Insurance. This insurance can be implicated in the income tax, related to Section 80D and Section 17 of the Income Tax Act, and employees and employers can avail tax benefits. However, there are certain terms and conditions which must be met for tax exemption.

Tax Benefit of Group Health Insurance for Employers

If the employer pays all the premium amount in lieu of the employees, this is known as a business expense by the company and the employer shows this expense as a profit-loss account and is therefore eligible for tax benefits according to the Indian Income Tax Act, 1961.

Also read: Minimum employees required for Group Health Insurance

Types of Employers that can avail tax benefits

  • Sole Proprietorship
  • Partnership Firms
  • Public Companies
  • Private Companies
  • Start-ups, mid and enterprise-level companies

Note: If both, the employer and the employee, pay for the premium insurance, then the employer can gain tax benefit only for the contributed amount and not for the amount paid by the employee.

Other reasons why employers should offer Group Health Insurance.

  • Increase employee loyalty
  • Better productivity
  • Decrease employee absenteeism
  • Enhance goodwill
  • Avail tax benefits

Also read: Benefits of Group Health Insurance Policy

Tax Benefit of Group Health Insurance for Employees

Section 80D of Income Tax Act

According to this act “Every individual can claim a deduction from their total income for medical insurance premiums paid in any given year under Section 80D.”

In certain instances where the employees also contribute to the premium payment, they can avail tax benefits as per section 80D of the Income Tax Act. If you are paying a premium for you, your spouse and your dependent children then You can claim a tax deduction of up to ₹25,000 per year. Additionally, you can claim a tax deduction of up to ₹25,000 every financial year if you include your parents in the policy too. However, if your parents are above 60 years of age, then you can claim up to ₹50,000 and if you and your parents are both above 60 years of age, then you can claim up to 1 lakh. This is because insurance premiums are higher for people of older age.

The benefit will depend upon the amount paid in premium and the applicable tax laws at the time of tax computation. This varies as per government regulations surrounding tax structure/benefits announced within the annual budget.

There are different possible instances for employees when it comes to the premium paid for Group Health Insurance. Each instance has a different tax implication.

Case A

When the employer pays the entire health insurance (there is no contribution from the employee)

In this case, as the employer is paying for the policy, therefore only the employer will avail tax benefits and not the employee.

Case B

When the employer pays for a certain amount and the remaining is paid by the employees. In this case, the employee can avail tax benefits in the proportion to the amount paid.

Case C

When the employer paid for the premium amount and the employee pays additional top-up to increase the sum of the plan. In this case, as the employee is paying only for the additional top-up, therefore the employee will avail only additional top-up benefits.

All the cases are subjected to the Income Tax Act.


Other advantages of Group Health Insurance for Employees

  • Broad-ranging health cover for free.
  • No waiting period for pre-existing diseases
  • Customization of the policy with add-ons and top-ups.
  • Can include parents/children/spouse/in-laws in the coverage

Group Health Insurance by Pazcare

Pazcare offers group health insurance for enterprises of as low as 7 employees, with the best prices in the market. Also, we provide additional benefits like mental wellness, unlimited doctor consultations, super-top, health checkups, laboratory allowance and more. Employers will get a sophisticated dashboard to easily manage and track the group health insurance policies and all other employee benefits provided. And employees can manage their benefits with our Pazcare app.

Talk to our sales experts to get the best industry insights and pricing

Get in touch
tip icon
tip icon

tip icon
tip icon

Key takeaways

Blog sources

Have questions? We are here to help

20,000 HRs have!
Subscribe here.

What you will receive in your inbox?
  • Guides on employee insurance and wellness
  • Surveys and reports
  • Updates on free wellness webinars
  • Features from Champions of HR - A Thought Leadership Initiative