Group medical insurance plans benefit both your company and employees. Group insurances are frequently used to offer health benefits to employees and as part of employee benefit packages. The employer acts as a sponsor for the group, thus bearing the premiums of the group members to be paid to the insurance company (or the service provider). Understanding how TDS is deducted at the source on a group insurance premium is important. Plum Insurance provides products focused on giving clients the best possible experience. Here is a simplified description of how the TDS gets calculated on group insurance premiums.
Who Should Deduct TDS?
Any entity who is liable for providing to an Indian resident any amount of money under an insurance plan, along with any bonus on the policy, besides the sum not includible in overall income under Income Tax Act Section 10(10D), must deduct income tax on such payment.
When Should TDS Be Deducted from Group Medical Insurance Premiums?
Group insurance plans are a boon for small businesses. A sizable number of businesspeople in India opt for them to save on costs and avail of several benefits from the government. However, TDS Payment on Group Insurance Plan premiums depends on a couple of factors. Let’s study those on a case-by-case basis with examples:
Case One:
Suppose your company has partnered with a certain insurance company and the employees are now covered with its group health insurance. Your team members are just enjoying the coverage without bearing any payments. In this case, you, the employer, are paying for their coverage as a part of your employee benefits package. Here, no TDS needs to be deducted from the employee. Your company can book the total premium cost as an expense. TDS will be deducted from the company while paying the premium amount to the insurance provider.
Example:
Mr. A works at XYZ Ltd., which provides group health insurance plans for their employees. The total insurance premium amount is covered by the company. So, when will TDS be deducted?
Since Mr. A is not paying for his insurance coverage, he does not need to pay any TDS. The TDS will be collected by the insurance company when XYZ Ltd. pays the premium amount.
Case Two:
Your company offers a group insurance plan to the team members, but they need to pay the premium from their salary to receive the benefits as per the terms and conditions of the policy. In this scenario, if your employees opt to receive the coverage, you will deduct TDS on the insurance premium amount from their salary.
Example:
Mr. B works at XYZ Ltd., which offers optional group insurance coverage to their employees. The insurance premium amount must be paid by the employees from their salary. So, when will TDS be deducted?
Since Mr. B will be paying for the insurance premium from his salary if he decides to take on the coverage, the TDS will be deducted from his salary.
Case Three:
Many companies offer group medical insurance plans for their employees today, and the individual premium amount is divided in such a way that both the employer and employee share the premium to ensure that they are adequately covered by health insurance. In this case, TDS will be deducted at two different points: first, from the employee’s salary and second, when your company pays the premium amount to the insurance company.
Example:
Mr. C works at XYZ Ltd., which offers an Optional Group Insurance Coverage to Their Employees. The Insurance Premium Amount will be equally Divided by the Employees and the Company. So, when will tds be Deducted?
TDS will be deducted in two different points in this case.
- TDS will be deducted from Mr. C’s salary by XYZ Ltd.
- TDS will be deducted when XYZ Ltd. pays the premium amount to the insurance provider.
Case Four:
Your company offers the team members a top-up group insurance plan. In this policy, the premium amount will be provided by the employer, but they can choose to refund the coverage after their base coverage limit is exhausted. In this case, TDS will be deducted in two points as well. First, when it pays premiums to the insurance company and second, when the employee wants to top up his base coverage limit.
Example:
Mr. D Works at XYZ ltd., Which Offers Optional Top-Up Group Insurance Coverage To Their Employees. The Insurance Premium Amount Will Be Paid By The Company, But Employees Are Welcome To Recharge Their Policies If They Have Claimed Their Base Coverage Limit. So, When Will Tds Be Deducted?
TDS will be deducted in two different points in this case.
- TDS will be deducted when XYZ Ltd. pays the premium amount to the insurance provider.
- TDS will be deducted from Mr. D if he decides to recharge his base coverage limit.
Conclusion
Group medical insurance plans can be a great benefit for employees of organizations that offer them. It also helps you keep your staff motivated under adverse conditions. While the benefits may vary depending on the plan, the coverage will generally cost less than what an individual could get on their own. All parties need to understand how TDS is calculated and how it applies to your situation. Only then can you hope to enjoy a smooth experience as you go about choosing your health insurance plan.