What are the tax benefits of offering corporate health insurance at your company?

As a business owner, there are several priorities for an organisation. While the primary objective of any business is mainly to profit, there are additional responsibilities and goals to take care of, from procuring and retaining top talent to building and providing them with a platform to succeed in so that it can bring success to the organisation. In addition to this, organisations must also consider the organisation’s finances, budget, taxes, etc, to make the right choice.

As an employer sponsoring corporate health plans for their employees, you might be eligible for certain tax benefits. Here is all you need to know about the tax benefits organisations would get from corporate health insurance policy.

Why should employers offer corporate health insurance plans?

In 2025, when faced with growing medical risks and rising medical inflation, a health plan acts as a safety net, financially protecting covered individuals from medical expenses. Whether it is reducing out-of-pocket costs, coverage for pre-existing diseases, total reduced healthcare expenses, increased morale, or building a safe and secure working environment, organisations can secure employees from these covered risks with the right health policy.

This, along with the benefits of corporate health plans, such as convenience, cost-effectiveness, customisability, and the ability to provide a unified plan with standardised coverage to all employees, makes it an excellent choice for employers wanting to offer insurance to their employees.

Which employers are eligible for tax benefits?

Being a sponsor for company group medical insurance, employers are eligible for tax benefits on the premium charged for the policy. Employers with at least 50 employees are eligible for tax benefits for the premium charged on a 12-month policy. Here are some of the types of companies eligible for tax benefits group medical insurance:

• Sole proprietorship
• Partnership firms
• Public listed companies
• Private companies
• Start-ups, mid and enterprise-level companies

Note: Employees will typically not be eligible for tax benefits under employer-sponsored corporate health insurance plans. However if an employee is partially paying for the group medical insurance, they will be eligible for tax benefits on that charged sum.

What are tax benefits companies can get by offering company group medical insurance?

Companies offering corporate health insurance to their employees can take advantage of tax deductions. Since 2018, employers can deduct the entire cost of their employees' health plan premiums from their taxable income. With eligible deductions of ₹25,000 for an individual or ₹1,00,000 for a family (if the parents are senior citizens) under Section 80D of the IT Act.

What are the benefits of providing group medical insurance to employees?

A group medical insurance under employees group insurance greatly benefits both the employee and the organisation. Employees can avail of benefits such as having access to quality healthcare with reduced overall and out-of-pocket expenses, a comprehensive health plan sponsored by the employer or coverage for dependents.

In addition, whether it is reducing absenteeism and promoting a positive and productive working environment, facilitating mutual growth for both employees and the employe, or as a tool to minimise taxes and attract and retain top talent, group insurance is highly beneficial to employers.

Also read: What Business Owners Need to Know About benefits of Group Medical Insurance?

Conclusion

Whether it is to secure employees' health and financial well-being, create a safe and productive work environment attracting and retaining top talent, or as an investment to avail tax benefits, a corporate health plan is the obvious choice for any company. By considering the above aspects, small businesses and large corporations can plan their upcoming financial year and avail themselves of tax savings benefits.

So secure the health and financial well-being of employees while promoting the growth of the organisation and saving taxes with the right group medical insurance plan for your organisation’s needs.

FAQ

1. What is the tax benefit of insurance policy?

   Insurance policies offer significant tax benefits under the Income Tax Act, 1961. For instance, premiums paid towards life insurance policies are eligible for deductions up to ₹1.5 lakh under Section 80C, while health insurance premiums can be claimed under Section 80D.

   If you’re paying for your own health insurance, you can claim up to ₹25,000 a year. If you’re paying for your parents' policy (senior citizens), the deduction can go up to ₹50,000. These policies not only provide a financial safety net but also help in health insurance for tax purposes, reducing your taxable income legally and efficiently.

   For businesses, there’s an added advantage. Premiums paid for business insurance (like property or liability coverage) can often be considered a business insurance tax benefit, meaning they are treated as a business expense, ultimately lowering the company’s taxable profits.

2. Can I claim company health insurance on my taxes?

   If your employer provides health insurance, you generally cannot claim the premium on your personal taxes, because you're not the one paying it. However, if you pay an additional amount (top-up premium) for extra coverage beyond what the company offers, that portion may be claimed under Section 80D.

   So, while the employer-paid group health policy itself isn’t directly claimable, any extra premium you pay from your own pocket qualifies. This is especially useful if you're looking to make the most out of your health insurance for tax purposes.

3. Is TDS applicable on health insurance premium paid by employer?

   Typically, TDS (Tax Deducted at Source) is not applicable on the premium amount the employer pays to the insurance company for an employee’s group health insurance policy. That's because the payment is made directly to the insurer and is considered a business expense for the employer, not a taxable benefit in the employee’s hands.

   However, if the premium is treated as a part of your salary package or CTC, then it might get taxed as a perquisite, depending on how it’s structured. In general, though, most companies categorise this as health insurance as a business expense, and not something that's taxed for the employee or attracts TDS.