Are Group Health Insurance Premiums Tax Deductible? - Loop

Are Group Health insurance premiums tax-deductible? Yes, Group health insurance premiums are typically tax-deductible, but there are some exceptions. Find out more here.
Team Loop Health
May 25, 2021

Is Group Health Insurance Tax Deductible?

Absolutely, yes. Group health insurance premiums are typically tax deductible, but there are some exceptions and group health insurance tax benefits for both employers and employees. Let's discuss them in detail.

Through thick and thin, good times and bad, you and your employees face life as a team. So with health insurance, why keep coverage for yourself?  

Group health insurance is one such way for businesses to look after their workforce. It includes several benefits for the employees and is an affordable and quick solution for getting health coverage. It’s light on the pocket as opposed to individual health insurance and is, therefore, a great way to stay protected at nil or low costs.

But what’s in it for employers? A happy workforce is a more productive one. By ensuring health coverage for its employees, businesses can benefit from better outcomes at work. Additionally, a group health insurance plan also entails lucrative tax benefits for organizations as enumerated below.

Group Health Insurance Tax Benefits - What The Law Says:

The Income Tax Act, 1961, covers tax deductions based on health insurance. As you know, as per Section 80D of the Income Tax Act, individuals can claim a tax deduction of Rs 25,000 on insurance payments for self, spouse, and dependent children. Not just individuals, employees of an organization can enjoy analogous benefits. The legislation also states employers can claim relief on paying health insurance premiums.

Group Health Insurance Tax Benefits For Employers:

As an employer, the health insurance premiums you pay on behalf of your employees are deemed as fringe benefits and may be considered as a business expense. So, if you pay the total premium payment, you can avail of group mediclaim policy tax benefits on the entire amount.

How does it work? 

Here, section 17 of the Income Tax Act that deals with ‘salary,’ ‘perquisite,’ and ‘profit in lieu of salary’ comes into play. It states that the premium you pay for your employees is a benefit, so it falls under the ‘Profit in lieu of salary’ category. It communicates that your company can claim the entire amount as a business expense in your profit and loss account irrespective of the amount of premium paid.

This clause also allows different business categories like companies (public or private), partnership firms, and sole proprietorship to enjoy benefits.  

In simple words, group health insurance premiums are an additional benefit to employees that’s why you can use them to get taxable income benefits. Therefore, group medical insurance for employees helps organizations reduce their overall tax liability.

Group Health Insurance Tax Benefits For Employees:

Company health insurance also entails tax benefits for employees. Group mediclaim policy tax benefits vary depending on which scenario you fall under.

  1. When you partially pay the premium amount  
  2. When you pay the entire amount 
  3. When your employer pays the entire amount 

In brief, you can claim the benefit of group health insurance tax deduction under Section 80D of the Income Tax Act for paying a premium on health insurance for yourself as well as your family members, but the tax implications for the three may vary. Employees can claim group health insurance tax deduction on medical expenses to save bills amount. If you’re looking for detailed information to determine which one’s best for you, you can read more here. 

Give A Protected Future To Your Employees:

Group health insurance premiums are tax deductible so they are beneficial for both employers and employees. It’s a solicited way to boost employee morale while reducing overall tax liability for organizations. Sign up with Loop Health and get a host of added features like free primary care, unlimited access to specialized doctors, and more. Feel free to get in touch with us at Loop Insurance.

Interested in learning more about Group Health Insurance? Click here

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