Corporate health insurance has become a standard feature of compensation packages across many companies. However, the availability of such coverage raises a question during ITR filing season: can employees claim premiums linked to employer-provided insurance as a deduction under Section 80D?
There is no straightforward “yes or no” answer to this question. While premiums paid entirely by an employer do not qualify for a , employees may be eligible for tax benefits in certain situations, such as when they pay for an additional coverage from their own pockets.
“A deduction under Section 80D of the Income-tax Act, 1961, is not available when the health insurance premium is fully borne by the company under a group health insurance policy,” said Chandni Anandan, tax expert at Cleartax. This is because the employee does not incur such an expense from their own taxable income, hence no deduction can be claimed, even under the old tax regime.
What if you bought a top-up or a super top-up plan?
Employees who purchase a top-up or super top-up health insurance plan on their own can claim a deduction Section 80D for the premium paid. As the payment for the additional cover is made directly by the employee, they can claim deduction on such payment even if the base health insurance is provided by the employer.
“It is commonly thought that the health insurance plan offered by an employer comes under the umbrella of . But in accordance with Section 80D, tax benefit comes according to the payee of the premium. It is beneficial for employees to have group health insurance, which is provided by the employer, but the tax benefit can only be availed if the premium is paid from the pocket of the employee,” said Siddharth Maurya, Managing Director of Vibhavangal Anukulkara Pvt Ltd.
Can you claim a deduction if you pay for your parents’ cover?
Yes, if an employee pays an additional premium to extend the employer-provided health insurance cover to their parents, then they can claim a deduction but only for the portion paid from their own pockets. The premium paid by the employer is not eligible for deduction in the employee’s hands.
“Any additional premium directly paid by the employee for parental coverage can be claimed under Section 80D, subject to the applicable limits and conditions,” Anandan said.
To sum it up, an individual can claim a deduction only on the part of the premium that is payable by the employee. Thus, if the base premium has been paid by the employer, but the top-up premium, super top-up premium, or additional parenteral cover premium has been paid by the employee, the deduction would be limited to the premium payable by the employee only.
What is Section 80D and who can benefit from it?
Section 80D provides a tax deduction on premiums and certain medical expenses paid during a financial year. Individuals or HUFs can claim a deduction under this section.
The deduction under Section 80D is separate from and over the ₹1.5 lakh deduction available under Section 80C of the Income Tax Act and is only available to those opting for old tax regime.