Microlesson · 5-min read

Section 36(1)(i) & (ib) - Insurance Premium Deduction

# Section 36 - Insurance Premiums

## Sec 36(1)(i) - Insurance of Stock-in-Trade

Premium paid for insurance of stock-in-trade (inventory) used for business is fully allowed as deduction.

## Sec 36(1)(ib) - Health Insurance of Employees

Premium paid by employer for health insurance of employees is allowed as deduction.
Payment must be made by any mode other than cash (typically through banking channel).
Scheme should be approved by the IRDA / Central Government.

Worked example

### Example 1

Example: A textile manufacturer pays ₹50,000 premium for insurance of finished goods stock and ₹2,00,000 premium for medical insurance of its employees (paid via NEFT). Both ₹50,000 and ₹2,00,000 are fully deductible under Sec 36(1)(i) and 36(1)(ib) respectively.

⚠️ Common exam mistakes

Allowing health insurance premium paid in cash — only non-cash payments qualify under 36(1)(ib).
Claiming premium for personal assets of proprietor under 36(1)(i) — only stock-in-trade qualifies.

Reference: Section 36(1)(i) and 36(1)(ib) — Income Tax Act, 1961

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Section 35D - Amortisation of

Section 36(1)(ii) - Bonus or C

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