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Employer Employee Presentation.pdf
- 3. Business Stages Initial Seed and Working Capital Start up Stage Infusion of further capital Growth Stage Business Continuity, Emerging Technology and Competition Sustenance and Expansion Stage
- 4. Common Business Challenges N E S W Key Challenges Working Capital Partnership Management Business Continuity Business Liability Management Competition Asset Equalization Employee Retention Succession Planning Legacy Planning Estate Planning Govt. Amendments Tax Planning
- 5. How do we categorize Companies? LARGE CAP COMPANIES MID CAP COMPANIES SMALL CAP COMPANIES MSMEs Companies with market capitalization of more than Rs. 20,000 Crores. Example: Infosys, Wipro, TCS, Tata Motors, Hero Honda, Bajaj Scooters, Reliance Industries Ltd. etc. Companies with market capitalization between Rs. 5,000 Crores to Rs. 20,000 Crores. Example: TVS Motors, Hero Honda, Tata Chemicals, Sun Pharma, LIC Housing Finance etc. Companies with market capitalization less than Rs. 5,000 Crore. Example: Bajaj Electricals, Thyrocare Technologies Ltd, Justdial Ltd., INOX Leisure Ltd Micro Enterprises: Yearly turnover less than Rs. 5 Crore. Small Enterprises: Yearly turnover between Rs. 5 Crores to Rs. 75 Crores. Medium Enterprises: Yearly Turnover of Rs. 75 Crores to Rs. 250 Crores.
- 6. Opportunity … 02 03 04 01 MSMEs / FAMILY BUSINESS PROPRIETORSHIP PARTNERSHIP HNIs / PROFESIONALS Stockists’, Distributor; Car Fleet Companies; Water Bottling Plants; Enterprises run by women like schools; restaurants etc. Kirana Store; Shop Owners; Laundry Shop Owner; Medical Shops; Car Dealership; Courier Companies Small Component; Manufacturers; Retailers; Builders; Lawyers Professional like CAs; Doctors; Lawyers, Architects; Business People with huge net worth; Property Owner; Antique Collectors 0 1 0 2 0 3 0 4
- 7. Business Needs Needs HNI / Professionals MSME/Family/ Businesses / LLP Partnership Sole Proprietor Business Continuity ✔️ ✔️ ✔️ Tax Saving / Low cost Working Capital ✔️ ✔️ ✔️ Personal Liability / Professional Indemnity ✔️ ✔️ ✔️ ✔️ Employee Retention ✔️ ✔️ Wealth Transfer / Asset equalization ✔️ ✔️ ✔️ Individual Business
- 8. Business Solutions Needs HNI / Professionals MSME/Family/ Businesses / LLP Partnership Sole Proprietor Business Continuity Keyman Insurance Partnership Insurance Term Plan Tax Saving / Low cost Working Capital HUF Employer - Employee Insurance / Keyman Insurance HUF Personal Liability / Professional Indemnity MWPA Keyman Insurance Partnership Insurance / MWPA MWPA Employee Retention Employer - Employee Insurance / Keyman Insurance Employer - Employee Insurance Wealth Transfer / Asset equalization Estate Equalization / Legacy Planning Employer - Employee Insurance Estate Equalization Estate Equalization / Legacy Planning Individual Business
- 9. Approach to Business Owners… Sir, would you like to take double benefit of section 80(C)? . We can help you do so… HUF Have you taken steps in mitigating financial risks associated with your business? KEYMAN Would you like to take unique steps to retain the top talent of the company in a tax efficient manner? EMPLOYER EMPLOYEE Have you planned for fulfilling liability towards your partner is something were to happen to you? PARTNERSHIP What is that one question that will make the Business Owner Think? What is that one question that will open the doors for you to discuss the solutions that you have?
- 10. Approach to Business Owners… Sir, with a single stroke of pen, you can create an asset for your family that cannot be affected by your business liabilities… MWPA Sir, with a relatively insignificant amount you can create an enormous asset that can help your children flourish in the paths chosen by them ASSET EQUALIZATION A small step today can create a legacy that your generations will cherish. LEGACY PLANNING Neither the creditors nor the court can take that away. What’s amazing is that this can be achieved without additional documentation This can help you in equal distribution of your assets, keeping the assets and the bond between your children intact A strong and prudent financial foundation, that the generations will leverage to get the edge above others What is that one question that will open the doors for you to discuss the solutions that you have? What is that one question that will make the Business Owner Think?
- 11. Concept of Employee Engagement The concept of employee engagement is sometimes confused with happiness, but it’s really about an employee’s psychological investment in their organisation and motivation to produce extraordinary results
- 12. Employer – Employee Insurance Scheme When an employer purchases policy on the life of an employee or employees as a welfare scheme such an arrangement is called Employer – Employee Insurance Scheme. Did you know? EMPLOYER – EMPLOYEE
- 13. Business Solutions Needs HNI / Professionals MSME/Family/ Businesses / LLP Partnership Sole Proprietor Business Continuity Keyman Insurance Partnership Insurance Term Plan Tax Saving / Low cost Working Capital HUF Employer - Employee Insurance / Keyman Insurance HUF Personal Liability / Professional Indemnity MWPA Keyman Insurance Partnership Insurance / MWPA MWPA Employee Retention Employer - Employee Insurance / Keyman Insurance Employer - Employee Insurance Wealth Transfer / Asset equalization Estate Equalization / Legacy Planning Employer - Employee Insurance Estate Equalization Estate Equalization / Legacy Planning Individual Business EMPLOYER – EMPLOYEE
- 14. Benefits for Employer 01 02 03 04 Tax Saving Tool * Employee Retention Tool Employee Welfare Tool Employee Engagement Tool * u/s 37(1)/Tax Deferment and no upper cap EMPLOYER – EMPLOYEE
- 15. Employee Benefits Defer Taxes Dependent / Supplementary Income Succession / Estate / Legacy creation Supports Retirement Planning Flexibility for partial withdrawal Helps enhance family financial security 6 5 4 1 2 3 EMPLOYER – EMPLOYEE
- 16. Who can buy Employer – Employee Insurance? Pvt Ltd, Public Ltd, Partnership, Proprietorship, Trust , Society can buy Employer – Employee Insurance Scheme for their employees EMPLOYEE 01 01 02 Drawing monthly salary Getting Form 16/salary slips from the employer ITR Computation showing income under the head of Salary Bank statement showing salary credit Directors of the company Head Of Departments Other employees EMPLOYER – EMPLOYEE
- 17. Employer-Employee Scheme Options PARAMETERS PROPOSER / OWNER EMPLOYER EMPLOYEE LIFE TO BE INSURED EMPLOYEE EMPLOYEE PREMIUM PAYOR EMPLOYER EMPLOYER BENEFICIARY* EMPLOYEE EMPLOYEE POLICY OWNER EMPLOYER EMPLOYEE PARAMETERS B A Employer has an insurable interest in the life of an employee (as per Insurance Act, 1938 – Section 2(11) Scheme A is more suitable in EEIS, since employer has more control on the scheme Employer Pays the Premium and chooses the Scheme *Pre-assignment the employer will be the beneficiary (Option A) EMPLOYER – EMPLOYEE
- 18. Employer-Employee Scheme Explained Employer pays the premiums and is the policyholder Employer pays the premiums as a Payor Employer undertakes to assign the policy to the employee Employee can continue to pay premiums on quitting the company After assignment, employer or employee anyone can pay premiums to keep the policy in force Proposer and Life Assured is Employee only Employer is Proposer and Employee is Life Assured B A EMPLOYER – EMPLOYEE
- 19. How does Scheme A works? 3 Scenarios EMPLOYEE RESIGNS Scenario 3 EMPLOYER – EMPLOYEE
- 20. Option A – Employee DIES during Service L2BI Age X Company Buys LI policy under Scheme A *Premiums are paid For no. of years as per the product chosen Policy Attains self sustenance Mode Employee, dies during the employment Company receives Death Benefit - Income U/S 28 (vi) Company makes Ex Gratia Payment to the Insured’s Family and claims deduction u/s 37(1) to net off the Income Beneficiaries' receive tax free income SCENARIO 1 EMPLOYER – EMPLOYEE *Premiums paid by the employer qualify for tax deduction without any cap under Sec 37 (1)
- 21. Option A – Employee RETIRES from service L2BI Age X Company Buys LI policy under Scheme A *Premiums are paid by the employer as per the policy terms Policy Attains self sustenance Mode Employee Superannuates *Company assigns in favour of the insured as conditional assignment *Insured (Employee) continues to pay the premium if due In case of Employee’s death Beneficiaries' receive tax free income SCENARIO 2 EMPLOYER – EMPLOYEE *Premiums paid by the employer qualify for tax deduction without any cap under Sec 37 (1) *Premiums paid by the employee will be taxable as perquisites under 17 (2) *Employee pays a one time tax depending on his tax bracket on the surrender value after assignment *No tax on assignment to the Company on assignment
- 22. Option A – Employee RESIGNS from Service L2BI Age X Company Buys LI policy under Scheme A *Premiums are paid For no. of years as per the product chosen Policy Attains self sustenance Mode Employee resigns from the Organisation *Company assigns in favour of the insured as conditional assignment. *If Policy has not reached Self sustenance, Employee Pays premiums & avails 80 C benefits Employee receives all benefits from the policy as per the product features which are taxable In case of Employee’s death, Beneficiaries' receive tax free income SCENARIO 3 EMPLOYER – EMPLOYEE *Premiums paid by the employer qualify for tax deduction without any cap under Sec 37 (1) *Premiums paid by the employee will be taxable as perquisites under 17 (2) *Employee pays a one time tax depending on his tax bracket on the surrender value after assignment *No tax on assignment to the Company on assignment
- 23. Tax implications – Scheme SL NO. PRE – ASSIGNMENT POST - ASSIGNMENT 1 The premium paid is eligible as expense under section 37 (1) Surrender Value at assignment is taxable for employee u/s 17(2) 2 No perquisite for employee u/s 17(2) Section 80(C) benefit available to the employee 3 Maturity / Death benefits taxable irrespective of assignment (Sec 28 (vi) - Business Income) Death benefits can be tax exempt u/s 10(10D) 4 Company makes Ex Gratia Payment to the Insured’s Family and claims deduction u/s 37(1) to net off the Income Survival / Maturity benefits are taxable in the hands of the employee if the policy is not 10(10D) compliant A EMPLOYER – EMPLOYEE
- 24. Tax implications – Scheme SL NO. Scheme B 1 Premium paid by company eligible for 37(1) benefit 2 Premium paid are taxable perquisite for employee u/s 17(2) 3 Section 80(C) benefit available to employee 4 Death benefit is tax free u/s 10(10D) 5 Survival / Maturity benefits are taxable in the hands of the employee if the policy is not 10(10D) compliant EMPLOYER – EMPLOYEE B
- 25. Treatment of Premium under E-E Insurance Employer is the owner & has interest in the Insurance policy – hence not treated as perquisite A Employee is the owner – hence the premium paid will be treated as “perquisite” as per sec 17(2)(V) of Income Tax Act 1961 B Premium paid is treated as expenditure u/s 37 (1) Business expense helps to reduce profit before tax(A) Reduced PBT helps reduce corporate tax liability & creates an asset (A & B) EMPLOYER – EMPLOYEE A B
- 26. Tax Angle (Reiteration) PARAMETERS Section 10 (10D) EEIS & Keyman Insurance excluded from tax free returns on maturity Tax free returns if the Sum Assured is at least 10% of the Premium Section 17 (2) (iv) NA Premium paid are taxable perquisite for employee u/s 17(2) Section 28 (vi) Maturity Benefits are taxable for the co. under the head Profits & Gains (pure protection to offset Business Loss) Maturity Benefits are taxable in the handoff employee under the Head: Income from Other Sources (Section 56 (2) (iv) Section 37 Allowability of Expenditure – Business Expenditure Death benefit is tax free u/s 10(10D) Section 80(C) benefit available to employee Maturity Benefits are tax free if Policy is 10(10D) compliant Circular 573 Payment made graciously to widow / legal heir – not taxable B A EMPLOYER – EMPLOYEE
- 27. Tax Gain for the Company – Case Study Calculation of Gain due to Deferment of Taxes (5 pay ULIP ) Premium Amount (Annual) paid by employer Corporate Tax Slab Total Premium Paid in 5 years by employer Tax Saved/Year u/s 37(1) by the company No of Years for investment (Policy Term)-Deferment Period Total Tax Saved by the company u/s 37(1) in 5 years Fund Value at end of policy term(@8%) as per XYZ ULIP* Net Investment By Company (Less Tax saved u/s section 37(1) Tax Paid on Maturity Value (@31.2%) u/s 17(3) paid by employee Rate of Interest for re- investment of Tax Saved Net Maturity value for employee Gain earned through Tax Deferment for policy term(@6%) *Returns are not guaranteed in a ULIP 25,00,000 1,25,00,000 20 4,00,00,000 1,24,80,000 2,75,20,0000 25.63% 6,40,750 32,03200 9,29,6800 6% 6,24,935
- 28. Important Proprietors cannot be covered under Employer Employee Insurance Partners can be offered employer-employee cover being proposed by Employer, provided they are drawing salary from the Firm
- 29. Simplified Documentation SL No. PROPOSER INSURED 1 Pan Copy KYC Proof 2 Address Proof Address Proof 3 Last 3 Years ITR Last 3 years ITR* 4 Last 3 Years P&L account statement* 5 Last 3 Years Balance Sheet* 6 Certificate of Incorporation 7 Covering Letter from the Company (As per BAXA Annexure) 8 Company Undertaking (As per BAXA Annexure) 9 Board Resolution (As per BAXA Annexure) 10 Employees covered (As per BAXA Annexure) 11 Beneficiary Appointment Form (As per BAXA Annexure) 12 Employee Declaration (As per BAXA Annexure) 13 Absolute Assignment by Employer (As per BAXA Annexure) 14 Beneficial Ownership Declaration (As per BAXA Annexure) *P/L and Balance Sheet required only if ITR does not justify cover asked for. Only 3 pages required from P/L and Balance Sheet If business entity is LLP, Pvt. Ltd. or Public Ltd., then no papers like P/L, Balance Sheet, MoA, AoA required *Based on Underwriter's Discretion.
- 30. Thank You