Is Group Insurance Premium paid by the employer taxable in the hands of the employee? ✅ Relevant Legal Provisions: Section 17(2)(viii) of the Income Tax Act, 1961 Rule 3(1) and Rule 3(2) of the Income Tax Rules, 1962 📜 As per Section 17(2)(viii): “Perquisite” includes the value of any other benefitRead more
Is Group Insurance Premium paid by the employer taxable in the hands of the employee?
✅ Relevant Legal Provisions:
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Section 17(2)(viii) of the Income Tax Act, 1961
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Rule 3(1) and Rule 3(2) of the Income Tax Rules, 1962
📜 As per Section 17(2)(viii):
“Perquisite” includes the value of any other benefit or amenity provided free of cost or at concessional rate by the employer to the employee and is taxable to the extent prescribed under the rules.
🔍 Analysis: Types of Group Insurance
| Type of Insurance | Who Pays? | Taxable in Employee’s Hands? | Explanation |
|---|---|---|---|
| Group Term Life Insurance | Employer | ❌ Not Taxable | Treated as business expense of employer. Not a perquisite under Rule 3. |
| Group Health/Mediclaim Insurance | Employer | ❌ Not Taxable | Not a perquisite if benefit is for employee/spouse/dependents. |
| Group Personal Accident Insurance | Employer | ❌ Not Taxable | Treated at par with life/medical cover; not a perquisite. |
| Keyman Insurance Policy | Employer | ✅ Taxable in employer’s hands if assigned to employee | If employer transfers policy to employee, it becomes a taxable perquisite. |
🧾 Rule 3 Clarification – Perquisite Valuation:
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As per Rule 3(1) and 3(2) of the Income Tax Rules, premium paid for group insurance is not treated as a taxable perquisite unless the employee is the direct beneficiary or owner of the policy.
📘 Conclusion:
✅ If your employer pays the premium of group insurance policies (term life, health, or personal accident), it is not taxable in your hands as an employee.
❌ However, if the employer assigns the policy to you, especially in case of a Keyman Insurance, the surrender value or assigned value becomes taxable under the head “Salaries”.
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How is income tax calculated on LTC (Leave Travel Concession) or LTA (Leave Travel Allowance)? ✅ Relevant Legal Provisions: Section 10(5) of the Income Tax Act, 1961 Rule 2B of the Income Tax Rules, 1962 📜 Bare Act Extract – Section 10(5): “In computing the total income of a previous year of an indiRead more
How is income tax calculated on LTC (Leave Travel Concession) or LTA (Leave Travel Allowance)?
✅ Relevant Legal Provisions:
Section 10(5) of the Income Tax Act, 1961
Rule 2B of the Income Tax Rules, 1962
📜 Bare Act Extract – Section 10(5):
📜 Rule 2B – Conditions for Exemption:
The exemption is available only for travel within India.
The exemption applies to actual travel fare, not for other expenses like sightseeing, food, or hotel stays.
It can be claimed twice in a block of 4 calendar years (current block: 2022–2025).
Exemption allowed for:
Air travel (economy fare of national carrier)
Rail fare (AC first class)
Bus fare (deluxe class, if rail/air not available)
📘 Family Definition (Explanation to Section 10(5)):
Includes:
Spouse
Children (maximum of 2 children born after 1 October 1998)
Parents, brothers and sisters wholly or mainly dependent on the employee
🧮 Tax Calculation – Step-by-Step:
🧾 Illustration:
LTA received: ₹40,000
Actual travel (AC train) fare for eligible family: ₹25,000
Exemption allowed: ₹25,000
Taxable Amount: ₹15,000
📌 Other Key Points:
Proof of travel (tickets, boarding passes, etc.) must be retained.
Unused LTC in a block? You can carry forward 1 travel to the next block, and claim it in the first year only.
If LTC is encashed without travel, it becomes fully taxable.
✅ Conclusion:
Under Section 10(5) read with Rule 2B, LTA/LTC is exempt from income tax to the extent of eligible travel fare for journeys within India. Any excess amount or non-travel expenses reimbursed are fully taxable.
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