When it comes to running a business, every decision has its own impact. Providing group health insurance for employees isn’t just a way to take care of your team but also a smart financial move. Many employers tend to overlook the significant tax benefits associated with group health insurance. If you’re an employer, understanding these advantages can help you save money while ensuring a healthier, happier workforce.
Tax advantage on offer
While group insurance helps foster employee loyalty and create a positive work environment, you can harness its tax benefit to lower your tax outgo. Under Section 37(1) of the Income Tax Act, 1961 expenses incurred for business purposes, including health insurance premiums paid by the employer, are deductible from business income.
This provision helps you reduce their overall taxable income, leading to significant savings. By utilising this deduction, you can offer comprehensive healthcare coverage to your employees without bearing excessive financial strain.
The entire premium paid is still eligible for deduction as a business expense. This makes it a financially viable strategy if you are looking to enhance your employee benefits while optimising your tax liability. Let’s understand it with an example. Suppose a company pays ₹5 lakhs as a premium for group health insurance and the amount on which it has to pay tax is ₹50 lakhs. The company can show ₹5 lakh as business expense and lower its taxable income to ₹45 lakhs.
Companies which can claim tax advantage on group medical insurance
The following companies can claim tax advantage on group medical insurance:
- Public companies
- Private limited companies
- Limited liability partnerships
- Proprietorship and partnership firms
- Start-ups and small and medium business
Conclusion
Providing group health medical insurance isn’t just an act of goodwill. It’s a strategic decision that can help you reap long-term business success. If you haven’t purchased group health insurance yet, it’s time to get one now.