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Tax Benefits in Group Health Insurance


Summary

Tax Benefits

Group health insurance offers health insurance coverage to a group of members under a single master health insurance policy, usually a group of employees of an organization. Group health insurance providers cashless or reimbursement claim settlement facility to the members of the policy in case of hospitalization due to any illness or disease

The major advantage of group health insurance policy is that there would be no waiting period under the policy for availing claims due to any illness or disease. There is a tax rebate on group health insurance policy which is available under the income tax act. The premium under the group health insurance policy can be paid by the employer as well as the employees. Employees can either pay a part premium or full premium under the group health insurance policy and claim tax rebates and other group health insurance tax benefits on the policy. 

Section 80D of Income tax act: 

Section 80D of the income tax qualifies for the health insurance premiums tax deductible. Health insurance premiums paid by the insured are eligible for income tax exemption under section 80D of the Income tax act. Under section 80D of the income tax, group health insurance premium deduction on taxes is possible.

The money spent on the health insurance premium is considered for income tax exemption or tax rebate on group health insurance. 

The expenses incurred on the healthcare of family members such as diagnostic tests, and hospitalization expenses also can be claimed for income tax exemption under section 80D of the income tax. 

Below are the maximum limits possible for income tax exemption under section 80D where the exemption can be availed for Self, Spouse, Children, Senior citizens, and parents. 

A maximum of ₹60k can be claimed for exemption under the income tax section 80D which includes the health insurance premium paid and the amount spent on preventive health care. 

TypeLimit of exemptionLimit for Preventive Health CheckupTotal Limit
Self + FamilyRs.25,000Rs.5,000Rs.30,000
Self & Family + Parents Rs.25,000 + Rs.25,000Rs.5,000 + Rs.5,000Rs.50,000
Self & Family + Parents (Senior Citizens)Rs.25,000 + Rs.50,000Rs.5,000 + Rs.7,000Rs.75,000
Self & Family (Senior Citizen) + Parents (Senior Citizens)Rs.50,000 + Rs.50,000Rs.7,000 + Rs.7,000Rs.1,00,000

Tax benefits for Employees:

Health insurance premiums tax deductible option is available for the employees who are the members of the group health insurance policy. Employees who pay a part premium or full premium can avail tax rebate on group health insurance policy.

There are certain cases where the employees would pay a part of the group health insurance premium such as the extra cover for family or parents or in cases where the employees contribute their group health insurance premium share and the employer bears a part of the group health insurance premium.

Employees who pay the group health insurance premium can avail of deduction in taxes under section 80D of the income tax act. 

There are 2 cases in which the employee can claim a tax rebate on a group health insurance policy which are mentioned below:- 

Case 1:- Employee pays a part of the group health insurance premium. 

In this case, the employee can get a premium payment certificate from the insurance company mentioning the premium paid under the group health insurance policy. This certificate can be submitted to the income tax for a tax rebate on the group health insurance policy. 

The maximum tax exemption that can be availed under the group health insurance policy, in this case, would be a maximum of ₹60k for the premium paid towards self, spouse, children, and senior citizen parents. 

Case 2:–  Employee pays his/her complete share of the premium. 

In this case, the employee can get a premium payment certificate from the insurance company mentioning the premium paid under the group health insurance policy. This certificate can be submitted to the income tax for a tax rebate on the group health insurance policy. 

The maximum tax exemption that can be availed under the group health insurance policy, in this case, would be a maximum of ₹60k for the premium paid towards self, spouse, children, and senior citizen parents. 

Tax Benefits for Employers: 

The major benefit of group health insurance for employers is that they can avail tax benefits on the health insurance premiums which are tax deductible under the income tax act. Under the income tax act, organizations or employers who pay the premium for a group health insurance policy are allowed to claim the entire premium amount and avail of tax benefits. 

According to the income tax act, any amount paid by the employers for an employee’s benefit will be treated as “Profit in lieu of salary”. Employers are allowed to treat the group health insurance premium paid as expenses on employees and claim the entire premium paid under the business expense in their profit and loss account. There are different business types such as Sole proprietorship, partnership firms, startups etc, to claim the income tax benefits of group health insurance.

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Susheel Agarwal

Namaste. I'm Abhinay Nedunuru, a Fellow of the Insurance Institute of India with a passion to make insurance simple and crisp. I write mostly on insurance and investment. I have a passion for teaching and training in particular to insurance. I'm currently doing my PhD from IIM in Marketing Management.