Accidents can happen anytime and can be tough on your finances, especially when medical bills start piling up. That’s when having a group personal accident (GPA) insurance can help. It covers a group of people, typically employees of a company, against accidents, including things like accidental death, disability and medical expenses. This way, employees can focus on recovery without stressing about lost income or expensive bills.
Additionally, both employers and employees can enjoy tax benefits under the Income Tax Act. Keep reading to learn more about group personal accident insurance deduction under income tax.
Does personal accident insurance offer tax deductions?
Many individuals assume that all insurance premiums give you tax deductions, but that's not the case. To qualify, you need to prove that the premium you paid is specifically for protecting your taxable income.
You may claim a tax deduction in the following cases:
- If you are a small business owner and you are paying for personal accident insurance to protect your earning ability, you could be eligible for tax deductions. In this case, insurance is considered necessary to secure your income in case of an accident.
- If you have a standalone personal accident policy or one as an add-on with life or health insurance, you can claim tax benefits under Section 80D of the Income Tax Act.
List of group personal accident insurance policy tax benefits
The following are the GPA tax benefits for employers and employees
- Tax benefits for employers:
- Tax deduction on premiums paid: Employers can deduct the premiums paid for group personal accident insurance as a business expense under Section 37(1) of the Income Tax Act. This reduces their taxable income.
- Tax benefits for employees:
- No tax on premiums paid by employer: Employees do not have to pay tax on the premiums paid by the employer for the group personal accident insurance policy. The premiums are considered an additional benefit and are not taxed as part of the employee's income.
- Tax-free payouts: If an employee receives any payout or lump sum compensation due to an accident, injury or death, they won’t have to pay taxes for it. This benefit is provided under Section 10(10D) of the Income Tax Act and includes any claims made under the group personal accident insurance policy.
It is important to note that employees cannot claim tax deductions for premiums paid by the employer for a group personal accident insurance policy. They can only claim these benefits if they personally pay for an individual accident insurance plan.
Benefits of group personal accident insurance
A group personal accident insurance policy offers the following benefits for both employers and employees:
- Benefits for employers:
- Cost-effective benefit: Group personal accident insurance is a cost-effective way for employers to offer financial protection to their employees in case of accidents. Offering this policy helps improve employee satisfaction and loyalty. It also enhances the employer's reputation and can make the company more attractive to potential recruits.
- Tax deductions: Under the group personal accident insurance tax benefit, employers can deduct the premiums they pay for the insurance as business expenses under Section 37(1) of the Income Tax Act, reducing their overall taxable income.
- Benefits for employees:
- Financial protection: If the employee meets with an accident that results in injury or death, the policy provides financial support. It can cover their medical costs, hospitalisation and loss of income during recovery.
- Tax benefits: As mentioned, premiums paid by the employer for group personal accident insurance are not considered taxable income for employees. Additionally, if an employee receives a lump sum compensation due to an accident, injury or death, it will be tax-free under Section 10(10D) of the Income Tax Act.
- Cost-effective coverage: Group personal accident insurance is usually more affordable than individual policies since the risk is shared among multiple employees.
Conclusion
Group personal accident insurance typically covers accidents at work, during commuting, and accidents that result in death, disability or medical expenses. Therefore, it gives both employers and employees peace of mind, knowing there is financial support if an accident happens. Moreover, the personal accident insurance income tax benefits make the policy more affordable, offering greater financial relief for both parties.
Disclaimer: The information provided in this blog is for educational and informational purposes only. It is advised to verify the currency and relevance of the data and information before taking any major steps. Please read the sales brochure / policy wordings carefully for detailed information about on risk factors, terms, conditions and exclusions. ICICI Lombard is not liable for any inaccuracies or consequences resulting from the use of this outdated information.