Who doesn’t love tax benefits? As a company, it allows you to provide healthcare benefits for your employees, without hurting your profit margins. Whether you are a start-up, or an existing business, it’s important you know about the tax benefits available to you. Did you know that group health insurance is one such taxable benefit?
That’s right! You can now save on tax by offering group health insurance to your employees. It’s not straightforward though, there are several terms and conditions you need to know about. That’s why we are here to help. Here is a simplified version of how you can claim tax benefits on group health insurance plans for small businesses.
Group Health Insurance and Tax
In April 2020, the Indian government made it mandatory for all employers to provide medical insurance to their employees. To save on costs, most companies have opted for group health insurance plans. Such plans have reduced premiums, since they spread the risk across the group.
If you opt for group health insurance for MSMEs and startups plan, chances are you as an employer, are paying the premium for your employees. For the premium paid, an employer is entitled to tax deductions according to the Insurance Regulatory and Development Authority Act, 1999. That is because the premium can be considered as an expense by the company.
If the employer pays the full premium amount, the employee is not eligible for any tax deductions. Should the company have a co-pay scheme though, employees can claim the portion of the medical benefits coverage as a tax deduction.
Here’s a full list of all the situations that are tax exempt:
- Medical treatment provided to an employee.
- Reimbursement provided for treatment of an employee
- Any portion of the insurance premium paid for employer provided insurance
- Any reimbursement for the premium paid by the employee for individual health insurance
Eligibility for Group Health Insurance
Not all companies are eligible for group health insurance though. According to India’s insurance regulator the IRDAI, a company should have a minimum of 20 employees to be eligible for business health plans, and the associated tax benefits.
There are however, some provisions to allow micro-insurance policies to groups as small as five people. These policies are capped at Rs. 50,000, and are usually available for NGO’s and those below the poverty line.
If your company has less than 20 members, there is a workaround. The IRDAI has allowed employees to add their families, thus increasing the number of members covered. If the total number is above 20 members, your company is then eligible for group health insurance for startups and SMEs.
Family coverage depends on the insurance provider, but most allow spouses and children (up to a certain age) to be added. Some providers will even allow parents to be added, so it is worth checking out the terms and conditions if you want to hit the 20-member mark.
If you still fail to hit the 20-member mark, your employees can purchase medical insurance independently. If you as an employer, decide to reimburse them for the premium paid, you can still avail some tax benefits.
If your company has less than 20 members, you may be wondering if group health insurance is worth it. Here are a few key factors that you should know before deciding:
- Cost: Group plans will add to your working capital. Since you are paying for an employee, the monthly cost can be deducted from their salary. You will also find that group plans cost less per person, as compared to an individual plan.
- Coverage: Insurance companies can deny coverage to an individual for health or financial reasons. When an individual is a part of a company though, he/she cannot be denied coverage. On the flip side, group plans tend to be less customizable than individual plans. That means that all your employees are covered for the same thing, even if they have different healthcare needs.
- No Claim Bonus: Individual insurance policies have a no-claim bonus, a feature not found in group health insurance policies. Even if all your employees do not make a claim, you cannot get a no-claim bonus. That means that you will end up paying the same premium amount on renewal.
Choosing the Right Insurance
With all that in mind, you might find choosing the right group health insurance plan a daunting task. It can be even more complicated if you want a more comprehensive employee wellness program with healthcare benefits. That is why Onsurity was born – to provide these benefits for SMEs and startups.
Available in five different tiers, TeamSure by Onsurity provides you and your team with benefits that extend well beyond traditional group health insurance policies. Our partner insurer provides the insurance, and we give you a digital all-in-one platform with access to telehealth solutions, medicine ordering and much more.
No matter how small your team, Onsurity has a plan that’s right for you. TeamSure by Onsurity is flexible and built around you. Head to the website to check out how TeamSure can help your team work better.