Are Group Health Insurance Premiums Tax Deductible?

Are group health insurances tax deductible? The answer to this question shall be undoubtedly yes. The group health insurance policy which is sponsored by the employers is tax deductible. However, one may find some exceptions to it. In addition, the group health insurance offers tax benefits to both the employers and the employees.

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Are Group health insurances tax deductible?

Every employer offers group health insurance policy to their employees to ensure their safety and security against an unforeseeable event. In addition, the tax benefits also encourage the employer to provide such insurance products to their employees.

For small businesses, group health insurance is the key to taking care of the workforce of an organisation. Such types of insurance policies include several kinds of benefits for both the employer and the employees. It is an affordable policy and a quick solution for providing health coverage.

How Are Group Health Insurance Tax Deductibles?

The premium of group health insurance is deductible from the taxable income of the organisation. Section 80D of the Income Tax Act states that the employer paying group health insurance premiums may avail of tax benefits from the taxable income. The individuals may also claim tax benefits of up to INR 25,000 from their taxable income.

Are Group Health Insurances Tax Deductibles for Employers?

The group health insurance premium paid by the employer is deemed to fetch benefits for the organisation. The premium is considered as an expense of business which is shown in the expenditure column in the balance sheet. Therefore, an employer paying group health insurance premiums may fetch tax benefits on the entire amount.

Let us discuss how it works in order to better understand how are group health insurances taxes deductibles.

Salary, perquisite, and profit in lieu of salary come under section 17 of the Income Tax Act of 1969. Section 17 states that the premium paid by the employer is a benefit for the organisation. Such premiums fall under the category of profit in lieu of salary. It means that the firm or company may claim the premium amount as an expense in the balance sheet or profit and loss account.

Section 17 further allows public or private companies, firms, or sole proprietorships to fetch this benefit.

The premium of group health insurance is an additional benefit provided by the companies to their employees. Therefore, the employer may avail of tax benefits and deduct the amount from the taxable income. Hence, the group health insurance benefit helps the company in order to reduce tax liability.

Are Group Health Insurance Tax Deductibles for Employees?

The group health insurance also benefits employees. However, the tax benefits vary depending on many scenarios.

The employees may avail of tax benefits when they pay the entire premium amount. In this scenario, no benefits shall be enjoyed by the employer.

The employees may also avail of tax benefits when they pay they partially pay the premium amount.

Case Study

ABC Limited is a start-up. It starts providing good health insurance benefits to the employees in order to indemnify them against medical expenses. The company decided to bear the premium of group health insurance. Therefore, the company incorporated the premium expense in the profit and loss account and availed of the tax benefits under section 80D of the Income Tax Act.

Conclusion

When an employer or an employee pays the premium of a group health insurance policy, they may avail of tax benefits under section 80D of the Income Tax Act. Employees may claim the tax deduction benefits on their medical bills. While the employer may show the premium in the profit and loss account to claim the tax deduction benefit.

Written By: PolicyBazaar - Updated: 15 September 2023

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Policybazaar for Business - Group Health Insurance - Customer Reviews
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4.4/5
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3.8 April 09, 2023
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Excellent Support
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Delhi
4.3 March 15, 2023
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Increases Clients Expectations
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4.3 February 17, 2023
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Excellent Purchase
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4.3 February 04, 2023
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Prompt Services
Policybazaar's efficient claims process was impressive. In case of any medical emergencies, my employees were able to get their claims settled swiftly, allowing them to focus on their health and recovery without worrying about financial aspects.Thankyou
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4.3 January 22, 2023
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Budget Friendly Purchase
Thankyou PolicyBazaar for providing such a great plan at affordable premium rates. It was a budget-freindly purchase.
Delhi
4.3 January 09, 2023
Abhash
Multiple Range Of Benefits
I purchased Group health Insurance which offered me plans with affordable rates Thankyou PB.
Pune