Top Government Health Insurance Schemes and Their Tax Benefits

By: WE Team | Thursday, 26 June 2025

Government health insurance schemes in India play a crucial role in making healthcare services more affordable for the population, particularly for the economically weaker sections. Such programs are designed to offer financial protection against medical costs, making healthcare accessible and affordable to everyone.

Apart from providing financial security against medical emergencies, most of these schemes also have the added advantage of health insurance tax benefits. Let’s discuss some of the best government-sponsored health insurance schemes in India in detail.

What are the Top Government Health Insurance Schemes?

The following are the top government health insurance schemes launched by the Government of India:

1. Ayushman Bharat Yojana

Ayushman Bharat Yojana, or the Pradhan Mantri Jan Arogya Yojana (PMJAY), is an initiative by the Ministry of Health and Family Welfare, Government of India. Here are its details:

It was set up to provide cashless medical benefits to more than 40% of the total population in India.
This scheme provides health benefits coverage of ₹5 lakhs to economically weaker sections of society.
PMJAY encompasses expenditures on medication, diagnostic procedure charges, hospital treatments, and pre-hospitalisation expenditures.

2. Pradhan Mantri Suraksha Bima Yojana (PMSBY)

Pradhan Mantri Suraksha Bima Yojana aims to provide Indian residents with insurance against accidents. Check out its details below:

Those within the age bracket of 18 and 70 who own a bank or post office account are eligible for benefits.
This policy of personal accident insurance offers coverage of ₹2 lakhs for death and total disability and ₹1 lakh for partial disability.
The premium automatically gets deducted from the policyholder's bank account.

3. Central Government Health Scheme (CGHS)

The Central Government Health Scheme (CGHS) was introduced in 1954 with the aim of offering complete healthcare to central government employees, pensioners, and their dependents throughout India:

Beneficiaries are eligible to receive OPD treatments, reimbursement for hospitalisation, and specialist consultations from CGHS wellness centres, government hospitals, and private empanelled hospitals.
The scheme provides free diagnostic tests such as X-rays, MRIs, and AYUSH medicines and services.
It also covers medical aids such as hearing aids and prosthetic limbs.

4. Aam Aadmi Bima Yojana (AABY)

The Aam Aadmi Bima Yojana is a national health insurance scheme that provides coverage to the earning members or the head of the family between 18 and 59 years of age:

This scheme is specifically designed for rural villagers and landless citizens, as well as tenants in both rural and urban areas. It also gives scholarships to underprivileged children.
In the AABY scheme, the family of the insured gets ₹30,000 in case of natural death and ₹75,000 in case of accidental death.
Coverage for accidental disability is capped at ₹37,500.
The annual premium of ₹200 for this scheme is borne equally by the central and state governments.

5. Employees' State Insurance Scheme (ESIC)

The Employees' State Insurance Scheme is an extensive national health insurance scheme that provides medical coverage, maternity benefits, sickness benefits, disability benefits, and more to all Indian workers. Check out the scheme’s details below:

It provides full medical insurance to workers and their dependents as well as cash benefits in case of illness or temporary/permanent incapacitation.
Even the dependents of workers who get injured due to industrial accidents can be given a monthly pension called dependent benefits.
The ESIC scheme applies to all permanent factories and establishments employing over 10 people.
Certain states have extended this scheme's coverage to include businesses like shops, restaurants, transport services, and newspaper firms employing 20 or more people.

6. Universal Health Insurance Scheme (UHIS)

The Universal Health Insurance Scheme was created to provide medical and personal accident benefits to low-income families:

It includes hospitalisation expenses for the entire family and accidental death and disability benefits to the main breadwinner or head of the family.
The scheme is primarily funded by four public sector general insurance companies that offer health insurance to citizens living below the poverty line.
It pays for hospitalisation costs up to ₹30,000, provides a ₹25,000 accidental death benefit, and offers a daily disability benefit of ₹50 for a maximum of 15 days.

7. Chief Minister's Comprehensive Health Insurance Scheme (CMCHIS)

The Chief Minister's Comprehensive Health Insurance Scheme is a scheme that was brought out by the Tamil Nadu state government in association with the United India Insurance Company Ltd. Here are its details:

This family floater health insurance plan has been introduced in order to deliver quality health care services to low-income families in the state.
It provides coverage for 1,090 medical interventions, 52 diagnostic tests, and 8 follow-up treatments for economically weaker sections of the population.
Under the CMCHIS, all eligible individuals can avail of hospitalisation expenses of up to ₹5 lakhs from both private hospitals and government hospitals.
Residents of Tamil Nadu with an annual family income of less than ₹1.2 lakhs are eligible to apply for this scheme.

8. Yeshasvini Health Insurance Scheme

The Karnataka State Government introduced the Yeshasvini Health Insurance Scheme, targeting farmers, peasants, and members of cooperative societies:

Beneficiaries are eligible to obtain medical treatment in selected Yeshasvini network hospitals within the state.
The coverage is also extendable to family members of the beneficiaries.
This health insurance scheme covers 2128 procedures, which include 1650 medical and 478 ICU procedures.

Why Should You Consider Private Health Insurance?

Despite the wide range of benefits provided by government health insurance schemes, they are not available to all citizens. Only individuals who satisfy certain eligibility criteria can enrol under such schemes and claim their benefits.

Thus, if you are not a government employee or do not fall under the eligibility criteria for the above-mentioned schemes, opting for a private health insurance plan from a reputed insurer can be an ideal investment. It can provide coverage for a wide range of diseases and treatments, enabling you to get quality medical care when necessary.

What are the Tax Benefits of the Top Government Health Insurance Schemes?

Check out the health insurance tax benefits available on the above-discussed eight government-operated schemes in the table below:

Name of the Insurance Scheme	Tax Benefits Available
Ayushman Bharat Yojana	Any applicable tax benefits will follow the current tax laws.
Pradhan Mantri Suraksha Bima Yojana (PMSBY)	According to Section 80C, the deduction and the sum insured of ₹1 lakh are not subject to tax under Section 10(10D) of the Income Tax Act.
Central Government Health Scheme (CGHS)	People can receive a tax deduction of up to ₹25,000 for their contributions to the Central Government Health Scheme (CGHS).
Aam Aadmi Bima Yojana (AABY)	Taking advantage of the AABY scheme allows the insured individual to qualify for specific tax benefits under Section 80(D) and Section 10 (10D) of the Income Tax Act.
Employees' State Insurance Scheme (ESIC)	Not taxable under income tax.
Universal Health Insurance Scheme (UHIS)	The highest amount allowed for tax deduction is ₹25,000 each year for taxpayers under 60 years old and ₹50,000 each year for those over 60 years old.
Chief Minister's Comprehensive Health Insurance Scheme (CMCHIS)	Does not offer any tax benefits.
Yeshasvini Health Insurance Scheme	The highest deduction allowed is ₹25,000 for individuals and families, while senior citizens can claim up to ₹50,000.

As healthcare becomes more expensive, government health insurance schemes serve as a lifesaver for Indian citizens. They tend to fill the gap between access and affordability, providing a viable option for complete medical treatment.

Whether you are a salaried employee, a retiree, or a member of a lower-income group, there is probably a scheme that suits your requirements. Opting for such a suitable scheme not only comes with tax benefits but also ensures the security and well-being of all family members.