Can the Salaried Class Enjoy Tax Benefits On Health Insurance Policies Provided By Employers? Find Out

As the treatment costs are increasing, having a health insurance policy has become a necessity to mitigate monetary requirements should a medical emergency arise

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In the last few years, the expenses incurred on healthcare have been on a steep rise, encompassing expenditure on preventive check-ups, medical insurance, etc. As the treatment costs are increasing, having a health insurance policy has become a necessity to mitigate monetary requirements should a medical emergency arise.

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Realizing this need, many multinationals across the world, including India, are offering their employees medical insurance policies. These policies funded by the employers do help employees in case there is a disease, accident, or any health issues. The biggest advantage of the health insurance policy provided by employers is that it also covers the policy holder's spouse, children, and parents in some cases. This means the health plan covers the expense of treatment if the policyholder (who's also the employee) or his co-dependants are hospitalized.

However, it's important to remember that the health policy provided by the employer stands valid till the employee works for that organization. After leaving the company, it becomes void and null. Commonly, a lot of employees are dependent on the insurance policy provided by the company since they don't have a personal medical health policy. So, when the employee quits the organization, their health expenditure along with those dependent on them, have no coverage of any health policy.

An important question that arises here is: Are there any income tax benefits on health insurance reimbursed by the employer?

Income tax benefits

Premiums paid for group health insurance policies by the employer do not stand eligible for tax benefits. However, a salaried individual can claim a deduction from their total income for the part payment of medical insurance premium for self, children, and spouse under section 80D of the Income-tax Act, 1961. Moreover, those wanting to have higher coverage can contribute towards a top-up premium available for health and critical illness plans, which stands eligible for a deduction under section 80D and the employer can consider this while computing TDS on taxable salary.

The salaried class can also avail of an additional deduction for health insurance of parents up to INR 25,000 provided they are not senior citizens. Further, any expense incurred on preventive health check-ups of up to INR 5,000 by the policy-holder either for self, parents, or family can also be claimed as a deduction. This is regardless of one's age and other limits mentioned above. These deductions can be carried out at the time of calculating TDS on taxable income, should the employee produce receipts/documents. Alternatively, the salaried person can also claim it at the time of filing an income tax return for that specific financial year.

It's undoubtedly a necessity to have health insurance coverage from your employer, but from a tax benefit perspective, there's not much to gain unless the premiums are paid at one's own expense. So, when availing of a group or corporate health insurance policy, it's important to remember that insurance providers and plans differ between organizations. Your company could have a great health insurance policy or a not-so-beneficial one – you need to analyze it to understand how much coverage you have, how good it is, and how much more would you need.

This brings us to another question: can employers offer different benefits to different employees?

Variable health covers

Many corporate group insurance policies have inbuilt variable covers, which means, the benefits for employees may differ as per their hierarchy. Most organizations provide a higher sum insured to those at a senior level. Moreover, some companies also offer an additional OPD benefit included in the policy to the senior-level employees. Some other benefits also encompass lower capping in the plan like higher maternity capping or treatment capping.

Any health insurance benefits offered by organizations, including group health insurance policies, group term life insurance, and group personal accident insurance are not a statutory benefit. This means the law does not mandate the company to provide such benefits exclusively. Thus, it is up to the company to offer health covers in a manner they consider suitable for them.

One way to see this is that several other benefits like car allowances, travel allowances, and entertainment allowances among others also differ for the senior management employees. In the same way, insurance benefits can also vary!