Moment guide · FY 2026-27

My employer provides group life insurance

Is employer-paid group term life insurance taxable as a perquisite?

Employer-paid group term life insurance is exempt as a perquisite up to ₹50,000 of annual premium under section 17(2)(viii); the excess is taxable in your Form 16. Group mediclaim and health insurance paid by the employer are fully exempt. Keyman insurance premiums are deductible for the company, but the death claim received is taxable in the company's hands.

The #1 trap

Assuming all employer-paid insurance is a taxable perk — or, worse, that none of it is. Group term life is exempt up to ₹50,000 of premium a year under section 17(2)(viii), with the excess taxable, while group mediclaim is fully exempt. The keyman trap: the death claim on a keyman policy is taxable income for the company, not a tax-free receipt.

Rahul, sales director with employer-provided group cover

Rahul's employer pays a group term life premium of ₹60,000 a year for coverage of ₹2 crore on his life. Under section 17(2)(viii), the first ₹50,000 of the premium is exempt from perquisite, and the remaining ₹10,000 is added to his salary income as a taxable perquisite. His Form 16 Part B shows this ₹10,000 in the perquisite block, and he pays tax on it at his slab rate. His colleague with the same designation but only ₹45,000 of premium has no perquisite at all, because the entire premium is within the ₹50,000 ceiling. Rahul's employer also pays ₹18,000 a year for group mediclaim covering him and his family, and that entire amount is fully exempt — group health insurance does not have the ₹50,000 cap that applies to term life. Separately, the company holds a keyman policy on Rahul with a premium of ₹80,000, which the company deducts as a business expense under section 37, because keyman insurance protects the business against his loss. If Rahul were to die, the ₹1 crore claim would be taxable income in the company's hands, and the company would also recognise a deduction when the proceeds are applied. Rahul checks his own personal policies too: his ₹25 lakh term plan with an annual premium of ₹22,000 stays exempt under section 10(10D) because the premium is below 10% of the sum assured, but a colleague's high-premium money-back policy could lose the exemption. Rahul keeps the employer's policy schedule and the Form 16 perquisite break-up for his return. A quick call with us dials in the final figure. Rahul also checks whether the group term premium shown by the employer includes the GST component or any loading for a rider, because the ₹50,000 exemption applies to the actual premium and any excess is a perquisite even when it is small. If the employer increases the cover next year and the premium crosses ₹50,000, the Form 16 will show the excess, and he plans for the small addition to his tax. The group mediclaim, by contrast, has no premium ceiling and stays fully exempt, which is why employers often structure health cover separately from term life. A quick call with us dials in the final figure.