Employer - Employee Insurance a boon for both.
If asked
what really produces profits for business? Machines or Man, the obvious answer
would be Man. For an Employer the success of the organisation is dependent its
Team. A team is the best performing Asset, secure your Best Asset i.e.,
Employees.
Given the current
competitive scenario in businesses, retaining the services of trained and
experienced employees has become challenging to employers. The need to make
provision through Life Insurance Policy for the benefits of the dependents of
employee (OR) for his old age (OR) for him as a welfare measure has become
imperative.
Employer
needs to give certain additional benefits to a select band of Employees as a reward
for good services.
It’s always
a dilemma for the Employer about how much to pay, and from where to pay, to the
family of the Employee in case he/she dies during service. ‘You leave it to LIC to take care of that’. LIC Employer-Employee Scheme is the Solution.
An Employer
has the insurable interest in the life of an employee which is recognized by
law as per Insurance Act, 1938. In view of the above, an Employer-Employee
scheme gains importance.
Under the
Employer Employee scheme any employer can decide to propose for the insurance
on the lives of the designated Executives OR Employees of the company. To
retain the services of the trained and the experienced Executives/Employees
with the company whose services have major contribution for the growth of the
business qualitatively and quantitatively as well. The Employer may hold the
policy to encourage his Employees to continue service with him.
Eligible
Employers: The list
of companies eligible under Employer – Employee
•
Sole
Proprietorship Firm
•
Private
Limited Company
•
Public
Limited Company
•
Other
Non-Profitable Entity – Like NGOs / Society / Clubs / Trust / AOP (Association
of Persons) under formal contract
The Quantum
of insurance depends on individual employee’s income. All plans of insurance
are allowed.
Eligibility for Employees: Any employee employed with and drawing salary
from any of the employers as mentioned in point “A" and able to establish
Employer - Employee relationship is eligible for insurance under Employer-
Employee Scheme
Criteria for employees/ working Partner/ Directors having shareholdings in the employer Company / Firm.
Even a Loss-Making Company can also get the
Benefit.
Taxation: Section 37(1) of IT ACT, 1961,
Section 10(10-D) of IT ACT, 1961, Section 115 WB and WC of IT Act, 1961.
SECTION
37(1): The premiums paid by the employer are treated as deductible expenses of
business or profession under section 37(i) of IT act 1961. It can bring
monetary benefits to the company.
Section
37(1) Points to be Remember: -
·
It
should not be an expense already covered u/s 30 to 36 of IT ACT 1961
- Expenses should have been
incurred in the relevant accounting year.
- Expenses should be incurred
after the business is set-up.
- It should not be personal
expenses. It should be wholly exclusively for the purpose of business
- No Capital Expenditure
- It can be incidental expenses
to the business to be carried-out
SECTION
10(10-D): Besides the
risk of the employee is covered, the proceeds on maturity of the policy will be
tax free in the hands of the employee under Section 10 (10-D) Act,1961.
SECTION 115 WB & 115 WC: These sections deal with the Fringe Benefits to the Employees and Value of Fringe Benefit Tax in the hands of the employee. Premiums paid by the company are treated as fringe benefits u/s 115 WB & WC. It is a Cost to Company for the purpose of salary negotiations.
Employer
Benefit: It’s the
employer who reaps more benefit as the premiums paid by company will qualify as
eligible business expenses (u/s 37(1) of IT Act 1961) out of which 6.8% is tax
amount for the company.
‘Loyalty’
‘Efficiency’
‘Productivity’
‘Welfare’ etc., are the hallmark
of this scheme.
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