Health Savings Account (HSA) – Benefits, eligibility, and documents required for Health Savings Account

What is a Health Savings Account?

Health Savings Account is managed by the Government of India body and is a voluntary payment account. The concept involves both health as well as investment, and one can use it at the time of medical expenses. The funds invested in an HSA ensure you of getting the required monetary help for medical expenses in the future. While most of us are unaware of our future and may any time end up in the hospital, and it may make a big hole in our pockets, this kind of savings account can be of big help. However, you need to know that the payments you make with an HSA account should be done only for expenses related to healthcare.

A HSA can be opened by any individual in the country. However, an individual has to put money in this account before paying taxes on their income. HSA uses include covering the medical cost. The amount they contribute is then deducted from the taxable income, which enables you to pay fewer taxes on the income. Anybody opening an individual HSA must know that they cannot use the funds for any non-medical expenses.

Benefits of a Health Savings Account

HSA come with a lot of benefits, and here some of them are mentioned below:

• The funds you contribute to a HSA are deducted from the taxable income, and due to this the taxable income is brought down as health savings account tax benefit
• As you withdraw money from the HSA account, you would not be required to pay taxes. However, this is only applicable when the funds are being used for the right medical expenses
• If your family members are claimed on your taxes, health savings account coverage takes care of their medical expenses as well
• The HSA account is in most cases offered by employers. However, you can also get an account in your name and the money that you contribute to the account is further invested in several types of assets such as mutual funds, stocks, ETFs, bonds, T-bills, etc.

Eligibility Criteria for Opening a Health Savings Account

One can open an HSA with a bank or a credit union. However, you need to have your savings account with the bank or the credit union. As you plan to open a HSA, you need to meet the health savings account requirements as stated below:

One has to be either a citizen of the country or a permanent resident of India
The minimum age of the individual has to be 21 years, while the maximum can be 55 years.

Documents Mandatory for Health Savings Account

To open a Health Savings Account, you can either choose an online or physical mode. The documents that you need to provide are:

• Pan Card
• Aadhaar Card
• Proof of Address
• Passport sized Photograph

How is HSA different from an HRA and FSA?

These are three different concepts and quite different from each other. Let us discuss them further to understand each of them.

HSA	HRA	FSA
The full form of HSA is Health Savings Account	The full form of HRA is Health Reimbursement Account	The full form of FSA is a Flexible Spending Account
You can contribute the money to a savings account on a pre-tax basis	A monthly fund is provided by the employers to their employees for tax-free money that is designated for medical expenses	Employers own the FSA accounts and are quite similar to HRA
HSAs can either be opened by an individual or an employer can offer it	Only an employer can open it	Only an employer can open it
The amount that is  not used gets rolled over to the next year	The unused amount gets lapsed	The unused amount gets lapsed

 

Health Savings Account or HSA can be a great help for those who want to safeguard their own and their family’s health while maintaining financial stability. It is also a popular choice for employers to offer it as a benefit to their employees.