Health Insurance Premium Deduction 2026-27: Limits, Parents and Senior Citizens (Income Tax Act 2025)
Section 126 of the Income-tax Act, 2025 allows an individual or a Hindu undivided family (HUF) a deduction for health insurance premiums and certain medical spending. For an individual the basic limit is Rs 25,000 for self and family, plus Rs 25,000 for parents. The limit becomes Rs 50,000 where the insured person is a senior citizen (age 60 or more). Payment must be by a non-cash mode, except for preventive health check-ups.
This guide covers who can claim, how each limit works, what happens with lump-sum multi-year premiums, and the mistakes that cost people the deduction. Every figure is taken from section 126 as amended by the Finance Act, 2026, and the examples use tax year 2026-27.
Who can claim the health insurance deduction under the Income Tax Act 2025?
Section 126(1) allows the deduction only to an individual or a Hindu undivided family. A company or firm cannot claim it. The deduction comes out of income chargeable to tax in the tax year, and the payment must be made in a mode allowed by section 126(9).
Section 202(2)(a)(xii) computes total income under the new tax regime without any deduction under Chapter VIII, other than sections 124(1), 124(2), 125(2) and 146. Section 126 is not in that list of exceptions, so a person taxed under the new regime should not expect this deduction. Confirm which regime applies, and that section 126 sits in Chapter VIII, before promising any deduction.
What are the limits under section 126 for an individual?
| Payment for | Limit | Provision |
|---|---|---|
| Health insurance of self or family; contribution to Central Government Health Scheme or another notified scheme; preventive health check-up of self or family | Rs 25,000 in aggregate | 126(2)(a) |
| Health insurance of parent or parents; preventive health check-up of parent or parents | Rs 25,000 in aggregate | 126(2)(b) |
| Medical expenditure on self or a family member | Rs 50,000 in aggregate | 126(2)(c) |
| Medical expenditure on a parent | Rs 50,000 in aggregate | 126(2)(d) |
| Preventive health check-up (inside the limits above) | Rs 5,000 in aggregate | 126(3) |
| Insurance premium where the insured person is a senior citizen | Rs 50,000 instead of Rs 25,000 | 126(8)(a) |
"Family" here means the spouse and dependant children of the assessee (section 126(10)(b)). Parents are covered by their own clause. Siblings and in-laws are not part of the definition.
Is there an overall cap on the deduction?
Yes, in two separate buckets. Under section 126(4), the sum of clauses (2)(a) and (2)(c), that is premium plus medical expenditure for self and family, cannot exceed Rs 50,000. The sum of clauses (2)(b) and (2)(d), that is premium plus medical expenditure for parents, also cannot exceed Rs 50,000. The two buckets are tested independently, so the theoretical maximum for an individual is Rs 1,00,000.
How does the senior citizen rule work?
A senior citizen is an individual resident in India who is 60 years or more at any time during the relevant tax year (section 2(100)). Two rules apply to such a person:
- Higher premium limit. If the person whose health is insured is a senior citizen, the Rs 25,000 in clause (2)(a) or (2)(b) (or (5)(a) for an HUF) is replaced by Rs 50,000 (section 126(8)(a)).
- Medical expenditure only if no premium is paid. Spending on the medical treatment of a senior citizen under clause (2)(c), (2)(d) or (5)(b) is allowed only if no amount has been paid to effect or keep in force health insurance for that person (section 126(7)).
Can I claim a lump-sum premium paid for several years?
Yes, but spread over the years. Under section 126(8)(b), when a premium is paid in a lump sum in one tax year for more than one year, the deduction is allowed for each relevant tax year equal to the "appropriate fraction" of that amount. The fraction is one divided by the total number of relevant tax years. Relevant tax years start with the year of payment and continue for the years during which the insurance stays in force (section 126(10)).
Which payment modes are allowed?
| Type of payment | Mode allowed |
|---|---|
| Preventive health check-up | Any mode, including cash (section 126(9)(a)) |
| Premium, CGHS contribution, medical expenditure | Any mode other than cash (section 126(9)(b)) |
Which health insurance qualifies?
Section 126(11) requires the insurance to be under a scheme made by the General Insurance Corporation of India and approved by the Central Government, or by any other insurer and approved by the Insurance Regulatory and Development Authority established under section 3(1) of the IRDA Act, 1999. A policy outside these schemes does not qualify.
Do my parents have to be dependent on me, and can I claim for in-laws?
Section 126(2)(b) and (d) speak of "the parent or parents of the assessee" and place no dependency condition on them. The dependency test appears only in the definition of "family" (spouse and dependant children, section 126(10)(b)). The section does not mention in-laws, so a premium paid for them has no clause to fall under. The payment must be made by the assessee, out of income chargeable to tax in the tax year (section 126(1)).
How does the deduction work for an HUF?
For an HUF, section 126(5) allows up to Rs 25,000 for health insurance of any member and up to Rs 50,000 for medical expenditure on the health of any member. Under section 126(6), the total of the two cannot exceed Rs 50,000. If the insured member is a senior citizen, the Rs 25,000 becomes Rs 50,000 (section 126(8)(a)). The medical expenditure on a senior citizen follows the "no premium paid" condition in section 126(7).
Worked examples (tax year 2026-27)
Example 1: Ravi, 42, pays for his family and his senior parents
Assumptions: Ravi pays Rs 22,000 premium for himself, his wife and two dependant children, and Rs 4,000 for a preventive health check-up for the family, in cash. He also pays Rs 38,000 by bank transfer for a health policy covering his parents, both aged 68. All policies are IRDA-approved.
| Step | Working | Amount |
|---|---|---|
| 1. Self and family premium (2)(a) | Rs 22,000, non-cash | Rs 22,000 |
| 2. Preventive check-up (cash allowed, within Rs 5,000) | Rs 4,000, falls under (2)(a) | Rs 4,000 |
| 3. (2)(a) total against limit of Rs 25,000 | 22,000 + 4,000 = 26,000, capped | Rs 25,000 |
| 4. Parents' premium (2)(b), parents are senior so limit is Rs 50,000 | Rs 38,000 is below Rs 50,000 | Rs 38,000 |
| Deduction under section 126 | 25,000 + 38,000 | Rs 63,000 |
Example 2: Meena, 35, pays hospital bills for her senior father
Assumptions: Meena pays Rs 18,000 premium by card for her own policy. Her father, aged 70, has no health insurance. She pays Rs 60,000 by cheque for his medical treatment.
| Step | Working | Amount |
|---|---|---|
| 1. Own premium (2)(a) | Rs 18,000 is below Rs 25,000 | Rs 18,000 |
| 2. Father's medical expenditure (2)(d) | Allowed because no premium was paid for him (126(7)); Rs 60,000 capped at Rs 50,000 | Rs 50,000 |
| 3. Parents' bucket check, (2)(b) + (2)(d) | 0 + 50,000 is within Rs 50,000 | Rs 50,000 |
| Deduction under section 126 | 18,000 + 50,000 | Rs 68,000 |
Example 3: a three-year premium paid up front
Assumptions: Ravi pays a lump sum of Rs 60,000 on 1 June 2026 for a three-year policy covering himself and his family. The insurance stays in force for tax years 2026-27, 2027-28 and 2028-29.
| Step | Working | Amount |
|---|---|---|
| 1. Relevant tax years | 2026-27, 2027-28, 2028-29 | 3 |
| 2. Appropriate fraction | 1 / 3 | one third |
| 3. Premium eligible each year | 60,000 x 1/3 | Rs 20,000 |
| 4. Test against the Rs 25,000 limit | Rs 20,000 is below Rs 25,000, other (2)(a) payments in that year are added | Rs 20,000 in each year |
Example 4: HUF with a medical bill
Assumptions: a HUF pays Rs 30,000 premium for a member below 60 and Rs 20,000 for the same member's medical expenditure, both by bank transfer. Clause (5)(a) allows Rs 25,000 of the premium and (5)(b) allows the Rs 20,000. The total of Rs 45,000 is below the Rs 50,000 cap in section 126(6), so the deduction is Rs 45,000.
Real-life situations
- Sunita, 62, insures herself. She pays Rs 48,000 for her own policy by net banking. Because she is a senior citizen, her limit under (2)(a) is Rs 50,000, so the full Rs 48,000 is allowed. She cannot also claim medical expenditure for herself under (2)(c), because a premium has been paid for her (126(7)).
- Kiran pays the premium in cash. He hands Rs 15,000 in cash to an agent for his family policy. Section 126(9)(b) requires a non-cash mode for premiums, so this payment gets no deduction. Had he paid by UPI or cheque, it would have counted.
- Deepak pays for a policy with an unapproved insurer. The plan is not approved by IRDA or made under a GIC scheme, so it fails section 126(11) and no deduction arises, however much he pays.
Common mistakes
- Paying the premium in cash. Only preventive health check-ups can be paid in cash (126(9)).
- Claiming medical expenditure for a senior citizen who also has a policy. Section 126(7) disallows it if any premium is paid for that person.
- Ignoring the Rs 50,000 bucket cap. Premium and medical spending for the same group are tested together (126(4)).
- Claiming the full multi-year premium in one year. The deduction is spread by the appropriate fraction (126(8)(b)).
- Counting siblings or in-laws as family. Family means spouse and dependant children only (126(10)(b)).
- Treating the Rs 5,000 check-up limit as extra. It sits inside the Rs 25,000 limits, not on top of them (126(2)(a), (b) and (3)).
Quick reference
| Item | Individual | HUF |
|---|---|---|
| Premium limit | Rs 25,000 self/family, Rs 25,000 parents | Rs 25,000 |
| Premium limit, senior citizen insured | Rs 50,000 | Rs 50,000 |
| Medical expenditure limit | Rs 50,000 self/family, Rs 50,000 parents | Rs 50,000 |
| Combined cap | Rs 50,000 per bucket | Rs 50,000 |
| Preventive check-up | Rs 5,000 | Not separately stated in section 126(5) |
| Cash allowed | Check-up only | Check-up only |
How do CA firms track this across clients?
For a practice, the effort is collecting premium receipts, payment-mode proof and senior-citizen status for each client before filing. Finexo's practice management software lets you keep a document checklist per client and track what is pending. It does not compute the deduction or file returns for you.
Related reading: TDS on rent under the Income-tax Act, 2025.
Where this is in the Act
- Section 126(1): who can claim; 126(2): limits for individuals; 126(3): check-up limit; 126(4): bucket cap
- Section 126(5) and (6): HUF limits and cap
- Section 126(7): medical expenditure for a senior citizen; 126(8): senior limit and lump-sum premiums
- Section 126(9): payment modes; 126(10): definitions; 126(11): approved schemes and insurers
- Section 2(100): senior citizen; section 202: new tax regime
This article explains section 126 of the Income-tax Act, 2025 (as amended by the Finance Act, 2026). It is general information, not tax advice. Confirm the position for a specific case with a qualified chartered accountant.
Frequently Asked Questions
What is the health insurance deduction limit under the Income Tax Act 2025?
For an individual, Rs 25,000 for self and family and Rs 25,000 for parents under section 126(2). Where the insured person is a senior citizen, the Rs 25,000 becomes Rs 50,000 (section 126(8)(a)).
Can I claim a deduction if I pay the premium in cash?
No. Premiums and medical expenditure must be paid by a mode other than cash. Only payments for preventive health check-ups may be made in cash (section 126(9)).
How much is allowed for a preventive health check-up?
Up to Rs 5,000 in aggregate (section 126(3)). It forms part of the Rs 25,000 limits for self and family or for parents, not an extra amount.
Who counts as family for this deduction?
Family means the spouse and dependant children of the assessee (section 126(10)(b)). Parents have their own separate limit.
How is a multi-year premium paid in one go treated?
The deduction is spread equally over the relevant tax years in which the insurance stays in force, starting with the year of payment (section 126(8)(b) and 126(10)).
Can an HUF claim the health insurance deduction?
Yes. An HUF can claim up to Rs 25,000 for insurance and Rs 50,000 for medical expenditure of a member, with a total cap of Rs 50,000 (section 126(5) and (6)).
Is the health insurance deduction available under the new tax regime?
Section 202(2)(a)(xii) computes total income under the new regime without Chapter VIII deductions other than sections 124(1), 124(2), 125(2) and 146. Section 126 is not in that list, so it is not available there.
Do parents need to be dependent on me for the parents' limit?
Section 126(2)(b) and (d) refer to the parent or parents of the assessee without any dependency condition. Dependency appears only in the definition of family in section 126(10)(b).