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.
As per Section 17(2) of the Income Tax Act,1961 : Medical facilities/reimbursement in India
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.