Employer Employee

Employer employee plan refers to a life insurance policy purchased by an employer for the benefit of its employees. This arrangement is predicated on the idea that an employer has insurable interest in its employees. The interesting thing is that this arrangement benefits both the employee and the employer.

Employer Benefits:

• Increases employee loyalty and enhances morale
• Increases employee retention
• Recognize and encourage employee participation.
• Tax Advantage
• Reduces the expense of recruiting and training new employees.

Employee Benefits:

• Financial security and performance recognition
• Dependents' financial stability
• Establish a retirement fund
• Additional benefit of service

Taxation

• EES premiums paid by the employer are deductible under section 37 (1) of the Income Tax Act of 1961
• For income tax purposes, EES policies will be classified as Keyman Insurance policies and will stay the same even after assignment.
• Because the tax benefit under section 10(10D) is not accessible for all payouts under the Keyman Insurance policy, ABSLI will deduct TDS at the current rates u/s 194 D A (currently 1%) if the total payout to the payee is 1 lakh or more in a financial year.
• In EES policies with absolute assignment, the company's premium should be recognised as perquisites in the hands of the employee, and both the employer and the employee should be taxed appropriately.