Employer Employee

Working Capital Solution

March edition

This is a training content and strictly for internal circulation only

Context
You build your
empire with
hard work,
becoming the
face of your
business!
Livelihoods depend on you…

How do you take care of your employees?

5
 It has been a
difficult year due
to the pandemic,
Employees are
afraid of their
financial future…
 Employee
Children
How to create
Education Stresses Retirement corpus?
13%

Being Laid
Off 16%
Uncertain
How to save &
Future 50% where to invest?
Social
Distancing
18%
Concerns about
Source: businessworld.in
job security

Pandemic has shaken us all into planning our

financial future.
 Companies can Benefits As Preferred By
keep their Employees
employees
HAPPY even in
times of economic
gloom by using
appropriate
EMPLOYEE
BENEFIT TOOLS!

Source: economictimes.com
 Helping your employees
build their Financial
Security while creating a
Retirement Corpus is
also a way to attract and
retain talent!
 Employee
Benefit
Programs also
help
companies
create
GOODWILL
in the industry.
Benefit Employer
 Do Employer
Employee
Policies benefit
only your
employees?
“Employer Employee
EMPLOYER
EMPLOYEE

solution” – is now a
working capital
solution
Benefits to Employer

Corporate Tax Savings

Transfer of wealth

Liquidity

Life Cover

Retention of employee
How does Employer Employee work

 Employer has insurable interest under section 2(11) of

Insurance Act

 Employer Employee Scheme

 Proposer – Employer
 Life Assured – Employee

 Employer can claim the premium paid under section

37(1) of IT Act as Business Expense (with reference
to circular 762.)
ULIP Proposition
 IRR Signature liquidity calculations @ 8% returns
Equity - 50%of Debt - 55% of
FV FV

CONSERVATIVE TAX SCENARIO : Assuming a 8 % Return - Full amount taxed **Tax Deferred ( Premium+ Int. on loan) - Return on loan invested in business
Summary @ 8% returns on Signature
Employer Employee Calculator
Premiums Paid from Company Books 7,000,000 (-)
Tax Deferred 1,750,000 (+)
Effective Premium 5,250,000 (-)
Loan received for rotation in business 5,498,187 (+)
Net Cash Inflow 248,187 (+)
Interest paid on Loan 3,354,536 (-)
Tax Saved on Interest 838,634 (+)
Profit Generated on Loan rotated in business 3,744,599 (+)
Dividend Distribution Tax Saved by Pvt Ltd Firm 0 (+)
Loan repaid after 10 years before assignment 5,498,187 (-)
Effective Outflow and Impact on Liquidity -4,021,304

Maturity received by Director 10,996,374 (+)

Tax Paid By Director at assignment 3,397,880 (-)

Net Gain in Company Reserves -4,021,304 (+)

Net Gain in Director Account 7,598,494 (+)

Total Gain 3,577,191

*CONSERVATIVE TAX SCENARIO : Assuming a 8 % Return - Full amount taxed **Tax Deferred ( Premium+ Int. on loan) - Return on loan invested in business
GIFT Proposition
IRR GIFT liquidity calculations
Summary on GIFT returns

*CONSERVATIVE TAX SCENARIO : Assuming a 8 % Return - Full amount taxed **Tax Deferred ( Premium+ Int. on loan) - Return on loan invested in business
Process Flow
Process flow for working capital solution in case of ULIP…

ICICI Pru approaches Private Limited Company for Working Capital Solution

Employer proposes solution for employee

After 1 month of issuance employer eligible to avail loan

Loan proposal forms & agreement signed by employer

Finance Partner & ICICI Pru does eligibility check for loan eligibility

Assignment to Finance Partner on confirmation of sanction of loan

Loan Disbursed to employers account by Finance Partner (Bajaj Finserv)

Process flow for working capital solution in case of GIFT…

ICICI Pru approaches Private Limited Company for EE - Working Capital Solution

Employer proposes solution for employee

After 2 years of issuance employer eligible to avail loan

Loan proposal forms & agreement signed by employer

ICICI Pru does eligibility check for loan

Assignment on confirmation of sanction of loan

Loan Disbursed to employers account by ICICI

 Available at the To be additionally
S.No. Document Type
time of issuance taken for loan
1 PAN Card and Address Poof of Company Y N
2 Memorandum of Associate & Articles of Association Y N
3 Board Resolution – annexure 1 Y N
4 List of Directors and shareholding pattern Y* N
5 PAN card and address proof of all directors Y N
Undertaking from employer and employee on a Rs.500/- stamp paper –
6 Y N
annexure 2
7 Signed loan agreement form N Y
8 Cancelled cheque N Y
9 NACH Mandate N Y
10 Loan form of financial instution N Y
11 Assignment form N Y
12 Policy certificate N Y
13 Consent form N Y
*Needs to be added to the current list

Scenarios where LAIP shall not be extended

• Age of the LA should be >21 and < 65 years
• Policies, KYC and other documents with thumb impression cannot be accepted
• Pension and retirement products are not allowed
How does Employer Employee Insurance work?
Scenario 1 Scenario 2
Proposer: Employer
Life Insured: Employee Employee leaves the organization Death of Employee:
Scenarios are build in considering
Savings or Investment Products Surrender Value of the policy is paid to Employer gets the death benefit as
employer which is treated in the hands Business Profits U/S 28(vi) which they can
of employer as Business Income U/S pass on to employee family as exgratia
Expense treated under U/S 37(1) of
28(vi). payment (same FY, company & beneficiary
IT Act 1961 gets 100% tax exempt)

Premiums Paid by Employer

Scenario 3
Default on loan interest
Policy Title : Loan provider surrenders the policy at FV
Loan amount recovered through FV
: Employer will get the balance amount post paying off loan outstanding
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Selling!
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from you.

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