Employer_Employee_Presentation_Mar_24_.pptx

Insurance EEIS

1. Employer Employee Insurance Scheme Business Insurance & Life Goal Solutions Version 3.0 | 11 th Mar’24 1

2. 2 Market Opportunity 16,20,000 https://www.livemint.com/news/india/number-of-active-companies-crosses-1-6-million-led-by-service-sector-mca-11701698583369.html Number of registered active companies across India - Dec’23 16.20 Lakhs Registered companies 15,06,491

3. 3 Market Opportunity 44,293 33,189 19,662 18,444 11,063 9,482 4,928 4,593 2,649 1,557 1,117 1.5 Lakh+ companies registered as Private companies in one year 79,000 Indian rupees Total authorized capital Number of registered PRIVATE companies across India in FY23, by sector https://www.statista.com/

4. 4 Market Opportunity Sector wise distribution of active companies - Jan’23 https://www.mca.gov.in/

5. Market Opportunity State wise distribution of active companies - Jan’23 https://www.mca.gov.in/

6. 6 Threats to Businesses Physical Assets Human Assets Plant & Machinery Employees/Partner/Businessman Loss by fire & other natural calamities Loss due to strike, riots, terrorist attacks etc Loss due to death/ critical illness of Keyman/Employee/Partner Employee Attrition Tax Liabilities Attachment of Assets by Court/Tax authorities/Creditors Asset Equalization

7. 7 5 Solutions Employer - Employee Insurance Keyman Insurance Partnership Insurance Solutions to Safeguard Potential Threats MWPA Hindu Undivided Family

8. Employer Employee Insurance Scheme

9. Employer Retention of performing employees Increase the longevity of employees. Support employees to achieve their financial security and freedom. Save Tax/ Defer Tax. Concerns of an Employer

10. Employee Need good income to lead a decent life. Aspire to have a rewarding job. Expect a deserving recognition. Want to maintain a long-term association with current organization. Concerns of an Employee Achieve Financial freedom and security

11. Providing good work environment No novelty. Even competitors provide this Monetary incentives like bonus These may attract substantial taxes for the employee and Even competitors provide this Conventional Measures to retain employees Measure Effect

12. Encourages employee loyalty Encourages employee retention Protection against financial dent in case of employee dies/ retire Employer Employee Scheme can help Tax efficient Let’s understand how the Employer Employee insurance scheme works

13. What is Employer Employee Insurance Scheme? Life Insurance policy purchased by an Employer on the life of its employee(s) as a welfare scheme is known as employer employee Insurance scheme (EEIS). It is an arrangement where employer pay the premium for the benefits of the employee . The basis of the contract is that an Employer has insurable interest on the life of Employee. It works as a retention tool for the employee. It is a Win-Win proposition for the Employer and Employee (Both get benefitted)

14. Sc h e m e A Employer pays the premiums and is the policyholder Employer undertakes to assign the policy to the employee After assignment, employee needs to pay premiums to keep the policy in force Employer is Proposer and Employee is Life Assured Sc h e m e A Employer pays the premiums and is the policyholder Employer undertakes to assign the policy to the employee After assignment, employee needs to pay premiums to keep the policy in force Employer is Proposer and Employee is Life Assured Sc h e m e A Employer pays the premiums and is the policyholder Employer undertakes to assign the policy to the employee After assignment, employee needs to pay premiums to keep the policy in force Employer is Proposer and Employee is Life Assured Sc h e m e B Employer pays the premiums as a Payor Employee can continue to pay premiums on quitting the company Proposer and Life Assured is Employee only Available Schemes

15. How does Employer Employee Insurance work- Scheme A? Employer buys a life insurance policy on the name of the employee Employer pays the premium and is the policyholder. Once the policy is issued, it would be assigned to the employee either absolutely or conditionally Tax Employer can claim the premium paid as a business expense under Section 37 (1) In case of death the death benefit will go to the nominee of the employee under absolute & Under conditional assignment paid to the employer on the condition obtained that benefit will be passed on to nominee/beneficiary. Life Cover will be on the employee. *The scenario applies to a case where employer is the policyholder **The specific tax implications of maturity & death cases are dealt with in the subsequent slides

16. Benefits of EEIS Retain talented employees for longer term To gain the loyalty of his employees. Protection against Financial loss. Tax Benefits U/s 37(1) & Tax Deferment Financial Security for dependents Wealth Creation Build retirement corpus Sense of pride and performance rewards Employer Employee

17. Employer Employee Insurance Scheme (EEIS) Who can buy Employer Employee Insurance? Company Partnership Firm for its employees (Not for partners) Proprietorship firm for its employees Trust for its employees Legal entity EEIS is only for the employees . As per Section 15 of Income Tax Act 1961: any salary, bonus, commission or remuneration, irrespective of the nomenclature, due to/received by the Partner of a Firm from the firm, shall not be regarded as “Salary.”

18. EEIS can be granted subject to fulfilment of following conditions: Shareholding patterns Relationship of Employer – Employee needs to be established. No restriction on minimum number of employees to be covered Employee shareholding in the employer company is < =100% Family shareholding of the employee in the employer company is < =100% The definition of family for the purpose of granting insurance under employer employee scheme has also been revised to employee, his / her spouse and minor children Employer Employee Insurance Scheme (EEIS)

19. 19 Employer as proposer and premium payer Memorandum and Articles of association and Company Registration Certificate Latest shareholding pattern Audited balance Sheet and Profit and loss account for last 3 years Last 3 years ITRs with Computation PAN of company Premium cheque copy ( if paid by cheque / DD) Board resolution Signed by all directors of entity, with seal of entity Assignment forms To be uploaded under folder M267, also please fill the form completely. With seal of entity EE Annexure Details of employer and employee KYC of Authorized signatory mentioned on Board Resolution KYC of witness of assignment form is required to register assignment KYC of Beneficial Owners of entity Stake holders having More than 15%/ 25% ( companies) share in the employer entity. Employer’s Documents ( EEIS) KYC of employee : Photo: Recent photo Photo ID: Aadhar / Passport/ DL/ Voter ID Address proof: Aadhar / Passport/ DL/ Voter ID. Age Proof of Employee: PAN card / Aadhar card/ Passport/ DL etc Proof of Employment of Employee ( EEIS ): Form 16 for last 2 years/ Bank statement of 6 months with salary credits/ Salary Slips/ ITRs with COI Employees Documents ( EEIS) Bank Details Proof : Cancelled Cheque/ Recent Bank passbook Note: Medicals, income proof for eligibility , NACH, CDF, VPIVC of LA, is as per applicability Basic mandatory documents required Employer Employee Cases

20. Documents Required for Employer- Employee Scheme Company resolution Employer -employee Annexure Employer Employee Annexure & Company resolution needs to be submitted on Company Letter Head

21. EEIS Assignment Guidelines

22. EEIS Assignment Guidelines

23. EEIS Assignment Documents Assignment forms available in Smartone | URL : https://balicitsm.bajajallianzlife.com/smartone/SMARTHome.aspx#

24. Tax implications under EEIS As per Income Tax Act, ‘Keyman insurance policy’ means “Life insurance policy taken by a person on the life of another who is or was employee of the first mentioned person or is or was connected in any manner with business of the first person and includes such policy which has been assigned to a person at any time with or without consideration.” Taxability of EEIS needs to be viewed from Keyman insurance policy perspective. Proceeds under Keyman Insurance policy are not eligible for deduction under Section 10 (10D) and the same is applicable for EEIS policies.

25. Tax implications under EEIS Taxability of EEIS Policy Premiums paid by the employer under EEIS can be claimed as deduction under section 37 (1) of the Income Tax Act’1961 EEIS policies shall fall within the definition of Keyman Insurance policy for income tax purpose and shall continue to remain the same even aſter assignment. For all payouts under EEIS, tax benefit under section 10(10D) shall not be available therefore BALIC will deduct TDS as per prevailing rates u/s 194 DA (Currently 5% on the payout) provided the total payout to the payee is Rs. 1 lakh or above in a financial year. Premiums paid at any point under EEIS policies with absolute assignments and premium paid post assignment in EEIS policies with conditional assignments by the company should be treated as perquisites in the hands of the employee and should be taxed accordingly for both employer and employee At the time of assignment of the policy, the surrender value of the policy will be taxable in the hands on the employee Tax benefits and rates are subject to changes in the Tax Laws. Clients are advised to consult their Tax Consultant on above tax positions

26. U/S 37 (1) Treated as Expenses 1,00,00,000 Premium Paid 55,64,000 Tax without Investment 27,82,000 Tax with Investment 27,82,000 Tax Deferred Company Profit Before Tax (A) 2,00,00,000 Income Tax @ 25% (B) 50,00,000 Surcharge @ 7% (C) 3,50,000 Health & Educational Cess @ 4%(D) 2,14,000 Company Profit Before Tax (A) (2,00,00,000 less premium paid of Rs 1,00,00,000) 2,00,00,000 1,00,00,000 Income Tax @ 25% (X) 25,00,000 Health & Educational Cess @ 4% (Z) 1,07,000 Total Tax Payable X+Y+Z = 27,82,000 Surcharge @ 7 % (Y) 1,75,000 Total Tax Payable B+C+D = 55,64,000 EEIS Taxation

27. U/S 37 (1) Treated as Expenses 1,00,00,000 Premium Paid 66,76,800 Tax without Investment 33,38,400 Tax with Investment 33,38,400 Tax Deferred Company Profit Before Tax (A) 2,00,00,000 Income Tax @ 30% (B) 60,00,000 Surcharge @ 7% (C) 4,20,000 Health & Educational Cess @ 4%(D) 2,56,800 Company Profit Before Tax (A) ( 2,00,00,000 less premium paid of Rs 1,00,00,000) 1,00,00,000 Income Tax @ 30% (X) 30,00,000 Health & Educational Cess @ 4% (Z) 1,28,400 Total Tax Payable X+Y+Z = 33,38,400 Surcharge @ 7 % (Y) 2,10,000 Total Tax Payable B+C+D = 66,76,800 EEIS Taxation

28. This presentation belongs to Bajaj Allianz Life Insurance Company Ltd. Any unauthorized use, reprint or circulation is prohibited. Presentation is meant for internal circulation and training purposes only and is not a sales literature/material which can be used for the purpose of solicitation. Thank You