Is group life insurance taxable for employees in India?

Employer-paid group term life insurance is generally not taxable for employees in India. The premium a company pays for a group term life policy covering its employees is not treated as a taxable perquisite under Section 17(2) of the Income Tax Act, because the cover is held under a group master policy and is not individually assigned to each employee. The death benefit paid to a nominee is exempt under Section 10(10D).

Is the employer-paid premium a taxable perquisite?

The employer-paid group term life premium is generally not added to an employee’s taxable salary. Under a group scheme, the employer is the master policyholder and the benefit accrues to the employee’s nominee only on a future contingent event, so the premium does not represent a present, individually attributable benefit to the employee. This differs from a policy the employer takes out and assigns to a specific employee, where Section 17(2)(v) treats the premium as a perquisite taxable in the employee’s hands. The employer claims the group premium as a business expense under Section 37(1).

Is the death benefit from group term life taxable for the nominee?

The death benefit is exempt from tax for the nominee under Section 10(10D) of the Income Tax Act. When an employee dies during the policy term, the insurer pays the sum assured directly to the registered nominee, and this payout is not taxed as income. The exemption applies whether the employer or the employee funded the premium, which gives the deceased employee’s family a clean corpus to meet liabilities such as loans, education, and living costs.

Can an employee claim a tax deduction on group life premiums?

An employee can claim a Section 80C deduction only on premiums the employee personally pays, such as a voluntary top-up bought through payroll. Where the employer pays 100% of the base group term life premium, the employee has not borne a cost and cannot claim a deduction on it. If a company offers a voluntary enhancement and deducts the additional premium from the employee’s salary, that specific portion is eligible for the Section 80C deduction, subject to the overall ₹1.5 lakh annual limit.

Does GST apply to group term life insurance?

Group term life insurance premiums paid by companies attract 18% GST. The GST exemption that took effect on 22 September 2025 applies only to individual life and health insurance; group life and group credit life policies continue to be taxed at 18%. The GST is the employer’s cost on the premium and does not change the employee’s income-tax position on the cover.

How Plum approaches this

Plum sets up group health and group term life cover for companies with a minimum of 7 employees, against the common assumption that a group needs only 2 or 3 members. The claims experience is measured: Plum holds a claims NPS of 79 and a median pre-authorisation turnaround of 45 minutes, well inside the one-hour cashless pre-authorisation window set by the IRDAI Master Circular of May 2024. Cashless access depends on the insurer underwriting the policy, so the hospital network varies; Plum places cover with insurers including ICICI Lombard, HDFC ERGO, Bajaj Allianz, Star Health, Niva Bupa, and Aditya Birla Health Insurance, and matches the network to where a company’s employees actually live and work.

Frequently asked questions

Is group term life insurance taxable for employees in India? Generally no. The employer-paid premium is not a taxable perquisite under a group scheme, and the death benefit is exempt under Section 10(10D).

When is an employer life premium taxable as a perquisite? When the employer takes out a policy and assigns it to a named employee, Section 17(2)(v) treats the premium as a taxable perquisite.

Can I claim 80C on my office group life cover? Only on a voluntary top-up you pay yourself. You cannot claim a deduction on a premium your employer pays in full.