Tax Relief - Sickness Or Disability
Accidents and bad health are a part of life. You must plan for such an unforeseen event by taking on the proper insurance cover. The payments received under such plans may be substantial. Fortunately, such receipts generally qualify for tax relief. This is because they are considered as reimbursements against your hospital bills incurred for the treatment of sickness or injury.
It may also be possible to claim deductions for certain medical expenses over and above what is reimbursed to you. But you need to check whether these expenses qualify for itemization and tax relief.
However, tax treatment becomes different when the payments are received from your employer. Such payments fall into the same category as wages and salaries and, therefore, become taxable. If the premium for your health insurance plan has been paid by your employer, the receipts from the insurance company become taxable in your hands. In the case of mixed plans, the amounts received due to your payments enjoy tax relief, but the same does not apply to payments attributable to a premium paid you're your employer. If the amount of the premium paid through a cafeteria plan is not taken as your taxable income, the policy is considered as taken by your employer. Disbursals against such policies become taxable in your hands.
Even payments received from welfare funds, state plans, and funds of employee associations are not entitled to tax relief. It is important to be aware of these provisions so you can properly plan your taxes. It is a good idea to weigh the pros and cons of tax implication for all your financial transactions. Plan well for your sickness and minimize the taxes payable on the payments received, which are better used for getting you back on your feet.
by: Noreen Centeno
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