Many companies/organisations as a part of the compensation to employees and its HR policy pay for the health insurance of the employees and it’s family. The premium is paid by the company for the benefit of the employees.

However, the HR department needs to understand the tax implication for the premium paid  in the hand of the Company/Organisation and the employees.

The question of taxability arises in the hands of the employees for the HR department to finalize the taxation and issuance of Form 16 to be issued to the employees.

Any sum paid by the employer in respect of any premium paid by the employee to effect or to keep in force an insurance on his health or the health of any member of his family under any scheme approved by the Central Government or the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999), for the purposes of section 80D;

As per Section 80D of the Income Tax Act,1961 : Deduction for premium paid for Medical Insurance

Deduction under this section is available to an individual or a HUF. A deduction of Rs. 25,000 can be claimed for insurance of self, spouse and dependent children. An additional deduction for insurance of parents is available to the extent of Rs 25,000 if they are less than 60 years of age or Rs 50,000 (has been increased in Budget 2018 from Rs 30,000)  if parents are more than 60 years old.

Tax Implication

  • If the premium is borne by the company , it is perquisite in the hands of the employee and the company can claim as expenditure irrespective of the amount of premium payment ;
  • If the premium is borne by the employee, the employee can claim benefit of deduction under 80D subject to the limits specified to the relevant assessment year.

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  1. Naveen says:

    In my company we have group medical insurance but that entire amount is bourne by my salary on monthly basis. Will I be eligible to claim that amount under 80D section?

  2. Vaibhav Gupta says:

    If an employer pay the premium of group health insurance policy and deduct the premium amount from the salary of employee. Can that employee show that premium amount under sec 80D? Employer is showing full salary in form 16 but paying to employee after deduction of premium of group health insurance policy taken by employer for employees.

  3. Davinder Kumar says:

    If top up premium paid by employer,but premium amount added to employee’s taxable income.In this case can employee claim deduction u/a 80d

  4. Dr. Kailash Charokar says:

    Who issues 80D to the employee whose premium is deducted by the employer for group insurance premium from the salary, so the that the employee can claim tax benefit under 80D clause.

  5. Ajay Mishra says:

    Can employee claim benefit of top up premium paid for group insurance policy provided by the employer?
    This top up premium is paid by the employee from his own pocket.

  6. Ajay Mishra says:

    If an employer has taken a group medical insurance policy and provided a facility to employees through which employee can avail top up on the group medical insurance policy by paying extra premium from his own packet.
    Can the employee claim tax deduction benefit because he has paid extra premium from his own pocket?

  7. Sachin says:

    If an employer pays for health insurance and deducts premium over 3 months from employee’s payroll. Will such premium be considered as “Interest Free Loan”?

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January 2021