LIC Employer Employee Scheme is a policy where and employer buys life insurance policy for its employees.
Benefits to the employer
- Increases employee loyalty
- Minimizes employee attrition rate. Helps the business avoid recruitment and training expense losses due to high attrition rate.
- Helps to retain talents.
- Premiums paid can be treated as expenses for the company thus saving on taxes.
Benefits to employees
- Provides employee with short-term and long-term security against death, accident, disability.
- In addition to benefits from the company on retirement, employee gets tax-free income as maturity claim.
- Employee need not worry about buying and maintaining the policy.
Tax
- Premium paid by employer is taken as business expenses for the company and is deductible expense u/s 37(1) of income tax act.
- Premium paid are considered as perquisite in the hands of the employee and hence becomes part of taxable income of the employee u/s 17(2)(V) of the income tax act.
- Premium paid by the employer can be claimed for tax rebate by the employee u/s 80(c) of income tax act.
Employee Eligibility
To be a part of the Employer Employee Scheme an employee should satisfy following conditions.
- Total shareholding (if any) of the employee in the company should be less than 51%.
- Total shareholding (if any) of the employee, his/her spouse and minor children in the company should be less than 71%.
Disclaimer: The information provided in this blog is for general informational purposes only and does not constitute professional advice. While full efforts have been made to ensure the accuracy of data and numbers, no responsibility is taken for any errors or omissions. Tax implications on insurance, investments and returns from related products may change due to updates in tax laws. Always consult with your financial advisor or insurance expert before making any investment or insurance decisions. The author is not responsible for any financial losses or damages incurred as a result of relying on the information in this blog.
