Premiums paid for health insurance can reduce a taxpayer's taxable income, but the rules have a new home. The Income-tax Act, 2025 took effect on 1 April 2026, and the deduction long known as Section 80D now sits in Section 126 of the new law. This explainer sets out how the deduction works, using the Income Tax Department's summary of Section 126.
Who can claim and for whom
The deduction is available to individuals and Hindu undivided families (HUFs). An individual can claim premiums paid for themselves and their "family", which the law defines as the spouse and dependent children. Premiums paid for parents are counted under a separate limit.
The policy must be from an insurer approved by the Insurance Regulatory and Development Authority of India (IRDAI). Contributions to the Central Government Health Scheme (CGHS) or another notified scheme also qualify within the same limit.
The limits
- Self and family: up to ₹25,000 a year in total
- Parents: a separate limit of up to ₹25,000 a year
- If the insured person is a senior citizen, the relevant limit rises to ₹50,000
Payments for a preventive health check-up are allowed up to ₹5,000 a year. This is not an extra amount; it is counted within the ₹25,000 or ₹50,000 limit.
For a senior citizen who has no health insurance, actual medical expenses paid for them can be claimed instead, within the overall ₹50,000 cap for that category. Premiums and medical expenses together cannot cross ₹50,000 for self and family, or ₹50,000 for parents.
How the payment must be made
Premiums and medical expenses must be paid by a non-cash mode, such as UPI, card, cheque or net banking. Only the preventive health check-up can be paid in cash. A premium paid in cash does not qualify.
Multi-year policies
Some insurers sell policies covering two or three years for a single lump-sum premium. In such cases, the deduction is spread evenly over the years the policy is in force. For example, a premium covering three years is split into three equal parts, and one part is claimed in each tax year.
Old regime only
According to tax guides, this deduction is available only to taxpayers who opt for the old tax regime. The new tax regime, which is the default, does not allow it. Taxgarden notes that in the new Act the provision for choosing the old regime has moved from Section 115BAC to Section 202.
Which section number to use
Returns for financial year 2025-26 (assessment year 2026-27) are filed under the old 1961 Act, so forms for that year still refer to Section 80D. From tax year 2026-27 onwards, the new Act's section numbers, including Section 126, apply. According to Taxgarden, the deduction limits have been carried over unchanged.