Tax Saving Tips for Entrepreneur

Tax benefits in india

1. Employer employee insurance:-

Employer has an insurable interest in the life of his or her employee. With a policy issued under Employer – Employee scheme, the Employer generates Employee loyalty the objective of Employee retention is achieved through Conditional Assignment.

Employers in order to benefit their employee takes policies on them . Employer agrees to pay the premium on the policy taken on the life of the employee. Employer-employee insurance may increase loyalty. Employer can insure all / few of his employees


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    After the conditional assignment is over, Employee can still continue to get the benefit of insurance irrespective of the continuation of employment if he decides to continue with the policy.

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    During the conditional assignment, Employee doesn’t have to bother to ensure periodic payment from his salary since the payment is done by the Employer

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    After the period of Conditional Assignment, the Employee gains complete access to policy through Absolute Assignment by the Employer and then the Employee can pay premiums if the employer ceases payment of premiums due to cessation of employment.

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    On cessation of service of the employee, the employer has to either carry out absolute assignment of the policy in favor of the employee or surrender the policy for its cash value as insurable interest no longer exists.

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    In the event of cessation of Employment where there is a group policy the benefits of the Insurance policy would also cease

Tax Benefits in the Hands of Employer

  1.  Premium paid by the employer company can be claimed as deduction Under section 37(1) of the Act subject to fulfillment of conditions prescribed Therein.

Tax Benefits in the Hands of Employee

  1. During conditional assignment period, the employee would not be eligible for Section 80C of the Act as premium paid by the employer is not considered as perquisite in the hands of the employee.
  2. At the time of absolute assignment, the surrender value shall be taxable in the hands of the employee as perquisite under Section 17(2) of the Act.
  3. The amount of premium paid by the employer post the absolute assignment period shall be taxable in the hands of the employee as perquisite under Section 17(2) of the Act and also would be eligible for deduction under Section 80C of the Act.
  4. At the time of maturity, the policy proceeds shall be eligible for deduction under Section 10(10D) of the Act in the hands of employee.

2. Married women’s property act 1874:-

To free married women from certain anachronistic laws prevailing in India at that point in time.
Any married woman may effect a policy of insurance on her own behalf and independently of her husband; and the same and all benefit, there of, if expressed on the face of it to be so effected, shall ensure as her separate property, and the contract evidenced by such policy shall be valid


Death of a Single Beneficiary – The benefits go to the legal heir of the beneficiary.

Death in case of Multiple beneficiaries – The benefit will either go to the surviving beneficiaries or legal heirs of the beneficiary.

3. Keyman insurance :-

Keyman insurance can be defined as an insurance policy where the proposer as well as the premium payer is the employer, the life to be insured is that of the employee and the benefit, in case of a claim, goes to the employer. The `keyman’ here would be any person employed by a company having a special skill set or substantial responsibilities and who contributes significantly to the profits of that organization.
Who can be a Keyman?
Anybody with specialized skills, whose loss can cause a financial strain to the company are eligible for Keyman Insurance. For example, they could be:

  1. Directors of a Company
  2. Key Sales People
  3. Key Project Managers
  4. People with Specific Skills

Advantages of keyman insurance to the company :

  1. In case of death of a keyman the company gets money to cope up with the loss
  2. Any company buying keyman insurance for its employee can claim a deduction for the premium paid for the policy as a business expense under Section 37(1) of the Income Tax Act.
  3. No advance intimation/approval is necessary from the Income Tax authorities to claim deduction of insurance premium payment.
  4. This policy can be used as either an extra superannuation benefit or an ex-gratia payment to the key employee during the service period. If the company receives the proceeds on maturity, then they are taxable.
  5. The company can also raise loans on the policy from LIC at 12 per cent per annum.
  6. The fact that the employee/director’s life is insured for a large sum that will be paid by LIC to his family if he dies, it is bound to ensure loyalty and avoids employee turnover.
  7. For the executives earning high salaries, this policy can be given as a hike in salary and save on the tax outgo.
  8. At the same time, it also helps the company in its tax planning.
  9. The directors can also safeguard their immediate family from getting affected by the vagaries of the industry and the various business cycles that a company has to face.
  10. Insulate the risk of financial loss against loss of a Keyman.
  11. Interest on loans taken against a keyman insurance policy may also be allowed as business expenses.
  12. Premiums paid by the company on the life of a keyman would not be treated as perquisites in the hands of such a keyman when the company’s request is accepted by the assessing authority.
  13. Keyman Insurance policy is a positive measure to improve the retention of the keyman in the company.

4. Group term insurance

A type of insurance coverage offered to a group of people. This coverage will provide a benefit to the beneficiaries if the covered individual dies during the defined covered period. As with other types of group benefits, group term life insurance is generally cheaper than comparable individual policy coverage. For this reason, group term life insurance is often a key component in employee benefit packages.

5. Group health insurance

Group insurance is an insurance that covers a group of people, usually who are the members of societies, employees of a common employer, or professionals in a common group. Group health insurance helps companies identify and mitigate the risks their employees face. Rising costs of Healthcare have made it necessary for every employer to cover their employees and their families from financial instability that may arise in case of a hospitalization.

Employee Health Insurance

There are several group health insurance companies existing in the market and helping employers in providing sufficient cover to their employees. The features and benefits of employee health insurance are unique and explained below:

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    Group health insurance companies typically covers medical benefits for insured (self), spouse, children and dependent parents.

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    Some health insurance providers cover preexisting illness.

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    Employee health insurance can cover maternity cover as well.

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    Group health insurance can cover ancillary charges such as ambulance costs too.

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    Some employee health insurance policies can provide reimbursements of fees of specialists and other medical practitioners for follow checkups.

These days more and more companies are becoming employee-centric and every now-and-then introduce various benefits for employees’ betterment. Group insurance has emerged as one of the most preferred benefit. Group insurance ensures better health benefits for employees and increased employee satisfaction. Through this an employee can avail various benefits which are otherwise non-affordable in individual insurance policy.
Group health insurance is beneficial in the sense that it comes at a lower insurance premium as the risk is spread out among the group of members. Members to be insured will pool into the policy and can claim the coverage as and when required. In this way, the individual need not run around but can get the health security through the employer.
Today there are several options available in health insurance sector in India. They have been formulated to resolve the healthcare needs of people across the nation. Healthcare needs differ from individual to individual as well as from family to family. So, personal healthcare needs must be analyzed before finalizing any health plan.
In health insurance there are various options available. They are available in the form of

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    Individual Health Coverage

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    Family Health Coverage

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    Group Health Coverage

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    Senior Health Coverage

As per the need, all of us can buy the plan and enjoy best healthcare without any financial crisis. Among them, group health insurance is the one offered by corporate.

6. Group gratuity

Employee as per the Payment of Gratuity Act, 1972. It is a lump sum amount paid out to an employee, upon his exit from employment and fulfilling the criteria prescribed in the gratuity Act.

These statutory payments to employees create a gratuity liability for you as an employer. As an employer, one of your paramount concerns will be availability of sufficient funds to meet your company’s obligation for these gratuity payments.

Gratuity is not just a statutory obligation but also a very important tool today to retain and attract talented employees. However, gratuity liability of the employer tends to increase with an increase in the salary and tenure of employment.

A comprehensive and effective gratuity plan will help you in reducing business costs and meet the funding needs to make gratuity payments. It will also help you avail tax benefits as applicable to approved gratuity funds.

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