Health insurance protects your savings from a large hospital bill, and under the old tax regime it also reduces your income tax. The deduction long known as Section 80D now sits in Section 126 of the Income-tax Act 2025, which came into force on 1 April 2026. The limits and conditions are substantially the same as before, but the new section numbers, the choice between tax regimes and the removal of GST on individual health policies have raised fresh questions. This article explains how much you can claim for FY 2026-27 (tax year 2026-27), for whom, and how to avoid the mistakes that lead to claims being rejected.
Key takeaways
- Section 126 allows up to ₹25,000 for self, spouse and dependent children, and a further ₹25,000 for parents. Each limit rises to ₹50,000 where the insured is a senior citizen.
- The maximum combined deduction is ₹1,00,000, when both you and your parents are senior citizens.
- The deduction is available only under the old tax regime.
- Premiums must be paid by any mode other than cash. Preventive health check-ups of up to ₹5,000, within the overall limit, may be paid in cash.
What does Section 126 cover?
Section 126 allows individuals and Hindu Undivided Families (HUFs) to deduct the following from their taxable income:
- Health insurance premiums paid for yourself, your spouse, your dependent children and your parents.
- Contributions to the Central Government Health Scheme (CGHS) or other notified government health schemes, within the limit for self and family.
- Preventive health check-ups of up to ₹5,000 a year in total, counted within the limits above, not in addition to them.
- Medical expenditure on a senior citizen who has no health insurance, up to ₹50,000.
“Family” here means only your spouse and dependent children. Premiums for parents-in-law, siblings or other relatives do not qualify. Your parents, however, need not be financially dependent on you for you to claim their premium.
Deduction limits for FY 2026-27
A senior citizen is a resident individual aged 60 or more at any time during the tax year. The limits work in two separate buckets, one for you and your family and one for your parents:
| Situation | Self, spouse and children | Parents | Maximum deduction |
|---|---|---|---|
| You and your parents are all below 60 | ₹25,000 | ₹25,000 | ₹50,000 |
| You are below 60; at least one parent is a senior citizen | ₹25,000 | ₹50,000 | ₹75,000 |
| You (or your spouse) and your parents are senior citizens | ₹50,000 | ₹50,000 | ₹1,00,000 |
| You do not pay for your parents | ₹25,000, or ₹50,000 if a senior citizen is insured | Nil | ₹25,000 or ₹50,000 |
These are ceilings. You can claim only what you have actually paid, up to the applicable limit.
How much tax does it save?
The saving depends on your tax slab under the old regime. The table below shows the tax saved, including 4% health and education cess, ignoring surcharge. Figures are illustrative.
| Deduction claimed | 5% slab | 20% slab | 30% slab |
|---|---|---|---|
| ₹25,000 | ₹1,300 | ₹5,200 | ₹7,800 |
| ₹50,000 | ₹2,600 | ₹10,400 | ₹15,600 |
| ₹75,000 | ₹3,900 | ₹15,600 | ₹23,400 |
| ₹1,00,000 | ₹5,200 | ₹20,800 | ₹31,200 |
The saving is welcome, but it should not be the reason to buy a policy. Choose cover based on your family’s health needs and the likely cost of treatment in your city. Our guide on how to choose health insurance in 2026 explains what to check in a policy.
Old regime or new regime?
The new tax regime is the default, and it does not allow the Section 126 deduction. If you stay in the new regime, your premium brings no tax benefit, but the policy remains just as necessary. Whether the old regime suits you depends on the total of all your deductions, including Section 123 (formerly 80C) investments, home loan interest and HRA, not on the health insurance deduction alone. Our article on the old vs new tax regime for FY 2026-27 includes a break-even table.
Rules that decide whether your claim is valid
1. Payment mode
Premiums and medical expenditure must be paid by any mode other than cash, such as net banking, UPI, cheque or card. A premium paid in cash is not deductible. The only exception is a preventive health check-up, which can be paid in cash.
2. Multi-year policies
If you pay a single premium for a policy covering two or three years, the deduction is spread equally over the years of cover. For example, a three-year premium of ₹60,000 paid in FY 2026-27 gives a deduction of ₹20,000 in each of the three years, subject to the annual limit.
3. Medical expenditure for uninsured senior citizens
If you pay medical bills for a senior citizen parent, or for yourself as a senior citizen, the expenditure is deductible up to ₹50,000 only if no health insurance premium has been paid for that person. You cannot claim both the premium and the medical expenditure for the same person. This provision is useful for elderly parents who are unable to obtain cover.
4. Employer group cover
A group policy paid for entirely by your employer gives you no deduction, because you have not paid the premium. If you pay a top-up premium, for instance to add your parents to the group policy, and it is recovered from your salary, that amount can be claimed. Keep the payroll statement as proof.
5. GST no longer forms part of the premium
Individual health insurance policies have been exempt from GST since 22 September 2025. Earlier, the 18% GST was part of the premium you could claim. Now the deduction is simply the premium you pay. Policies bought for families under individual or family floater plans benefit; group policies are treated differently.
How to claim the deduction
- Salaried employees: declare the premium to your employer and submit the premium receipt during the investment proof window, so that it is reflected in your TDS. If you miss the window, claim it in your income tax return.
- Others: claim it directly in your return, choosing the old regime.
- Keep records: premium receipts or policy certificates showing the amount paid and the persons covered, bank statements for the payment, and bills for check-ups and medical expenditure.
Common mistakes to avoid
- Adding the ₹5,000 check-up on top of the limit. It falls within the ₹25,000 or ₹50,000 limit.
- Claiming premiums for parents-in-law. They are not covered. Your spouse may claim for his or her own parents if your spouse pays the premium.
- Both siblings claiming the full amount for the same parents. Each can claim only the premium he or she actually paid.
- Claiming the whole of a multi-year premium in one year. It must be spread across the years of cover.
- Claiming the deduction in the new regime. It is not available there.
Frequently asked questions
What is the new section number for 80D?
From tax year 2026-27, the health insurance deduction is in Section 126 of the Income-tax Act 2025. Returns for FY 2025-26 continue to use Section 80D of the Income-tax Act 1961.
What is the maximum health insurance deduction for FY 2026-27?
₹1,00,000, if you are a senior citizen and also pay for senior citizen parents. For a taxpayer below 60 with senior citizen parents, the maximum is ₹75,000.
Can I claim the health insurance deduction under the new tax regime?
No. Section 126 is available only if you opt for the old regime.
Can I claim a health check-up paid in cash?
Yes, preventive health check-ups up to ₹5,000 in total may be paid in cash, within the overall limit. Premiums paid in cash are not deductible.
Can I claim medical bills for my parents if they have no insurance?
Yes, if they are senior citizens, up to ₹50,000, provided the bills are paid by a non-cash mode and no health insurance premium is paid for them.
Related reading: how to choose health insurance in 2026, managing your parents’ finances: health cover and senior citizen benefits, old vs new tax regime for FY 2026-27, and advance tax for FY 2026-27.
Disclaimer: Tax-saving figures are illustrative for a resident individual under the old regime and ignore surcharge and other income. This article is based on publicly reported provisions of the Income-tax Act 2025 as of November 2026, which may change. It is general information, not tax or insurance advice. Consult a chartered accountant or qualified professional before making decisions. Mungekar Wealth accepts no liability for any loss arising from reliance on this article.
