Employer-Employee Insurance
EMPLOYER-EMPLOYEE INSURANCE SCHEME
A) The proposals will be treated as individual
proposals from the employees concerned
irrespective of whether the proponent is an
employer or an employee.
B) The minimum sum assured shall be determined in
terms of the rules relating to financial underwriting
for individual assurance taking into account the
existing life assurance on the life of the individual.
C) If the employee is the proponent, the policy shall be
assigned to the life assured at the earliest as per
agreement between employee and employer. A separate
letter from the employer stating the object of insurance,
the restrictions in respect of surrender, loan etc., to be
imposed and the conditions, timing etc., of assigning the
policy to the life assured, should be obtained with an
undertaking that the letter will form the basis of the
contract.
D) The proposal should be signed by a person authorised
by resolution preferably by one of the directors of a
public or private company. The seal of the person
signing may be affixed on the proposal form.
The restrictions imposed by the employer should be
reasonable.
Normally, these should not go beyond five years
from the date of policy in any case.
E) i) Form No. 340 has to be used for the purpose.
However, cover may be restricted to salary including
premium payable by the employer and income
derived from other sources.
iii) We may satisfy ourselves that employer is a well
known reputed commercial organisation.
iv) In some instances, employer may like to finanace
loan towards payment of premium to the employee,
proposal form no. 300 may have to be used in
such cases. The policy issued may be assigned to
employer as a collateral security and re-assigned
to the the policyholder on redemption of debt.
Usually, the scheme may be availed of by
companies and well established partnership
firms, but not by proprietory firms. If the
firm proposes for Insurance on the life of a
partner, the said partner must NOT be
having a substantial share in the capital of the
firm.
Tax Implications under Employer-Employee
Scheme :-
The premium paid by the employer
should be an expense for the employer
and should be eligible for deduction
under Section 37 of IT Act,1961.
The premium will form a perquisite in
the hands of the employee under section
17(2) (v) and will be taxed as such under
the existing tax structure.
The premium will be eligible for rebate
to the individual employee under Section
88 of IT Act,1961.
The maturity or death benefit will be
exempt from income tax under Section
10 (10) (d) of Act, 1961, at the hands of
the employee / his/ her nominee.
“Section 17-For the purpose of sections
15 and 16 and of this section...
(2) “perquisite” includes
(v)
any sum payable by the employer,
whether directly or through a fund, other than a
recognised provident fund or an
approved superannuation fund or a
Deposit-linked Insurance Fund established
under section 3G of the Coal Mines
Provident Fund and Miscellaneous
Provisions Act, 1948 (46 of 1948 ), or, as the
case may be, section 6c of the Employees’
Provident Funds and Miscellaneous
Provisions Act,1952 (19 of 1952), to effect an
assurance on the life of the assessee or to
effect
a contract for annuity”.