Section 126 of the Income-tax Act, 2025 allows an individual or HUF a deduction for health insurance premia and medical expenditure. The base limit is ₹25,000, raised to ₹50,000 for a senior citizen, with a ₹5,000 sub-limit for preventive health check-ups and an overall ₹50,000 cap for each of self and parents.
What section 126 does
Section 126 carries forward section 80D of the Income-tax Act, 1961 with its structure intact but its arithmetic clearly laid out across eleven sub-sections. It is available to an individual or a Hindu undivided family.
The architecture is two parallel baskets: one for self and family and one for parents. Each basket has an insurance component and a medical expenditure component, and each is subject to an overall ceiling of ₹50,000 under sub-section (4).
Two conditions decide most disputes. Medical expenditure on a senior citizen is deductible under sub-section (7) only if no health insurance premium has been paid for that person. And under sub-section (9), payment must be other than cash — except for preventive health check-ups, where cash is permitted.
The Income-tax Act, 2025 takes effect from 1 April 2026 and applies from tax year 2026-27. The Income-tax Act, 1961 continues to govern every year up to 31 March 2026, including assessments, appeals and penalties for those years, because of the repeal and savings provision in section 536. Figures quoted here are the amounts written into the Act as enacted (with the Gazette corrigenda of 3 September 2025); the annual Finance Act can change rates and thresholds.
Old Act and new Act, side by side
The table below shows what the Income-tax Act, 1961 did and where the same ground is covered in the Income-tax Act, 2025.
| Income-tax Act, 1961 | What it did | Income-tax Act, 2025 |
|---|---|---|
| 80D(1) and (2) | Health insurance for self, family and parents | 126(1) and (2) |
| 80D(2)(a), proviso | ₹5,000 preventive health check-up sub-limit | 126(3) |
| 80D(2A) | Medical expenditure for senior citizens | 126(2)(c) and (d) with 126(7) |
| 80D(3) | HUF deduction | 126(5) and (6) |
| 80D(4) | Senior citizen limit of ₹50,000 | 126(8)(a) |
| 80D(4A) | Lump sum multi-year premium spread | 126(8)(b) with 126(10)(a) |
| 80D(2B) | Mode of payment | 126(9) |
Section 126 sub-section by sub-section
Read this alongside the bare text — each heading below is a sub-section of the section as enacted.
Sub-sections (1) and (2) — the four components for an individual
An individual gets the aggregate of: (a) health insurance for self or family, contributions to the Central Government Health Scheme or a notified scheme, and preventive health check-up for self or family, up to ₹25,000; (b) health insurance and preventive check-up for the parent or parents, up to ₹25,000; (c) medical expenditure on the health of self or a family member, up to ₹50,000; and (d) medical expenditure on the health of a parent, up to ₹50,000.
Sub-section (3) — the ₹5,000 preventive check-up sub-limit
The amounts under clause (2)(a) or (2)(b) that are paid for preventive health check-up are allowed only up to ₹5,000 in aggregate. This is a sub-limit within the ₹25,000, not an addition to it.
Sub-section (4) — the two ₹50,000 ceilings
The sum under sub-section (2) shall not exceed ₹50,000 in the aggregate of clauses (2)(a) and (2)(c) — the self-and-family basket — and separately ₹50,000 in the aggregate of clauses (2)(b) and (2)(d) — the parents basket. So the maximum for an individual is ₹1,00,000 across both baskets.
Sub-sections (5) and (6) — the HUF
A Hindu undivided family gets the aggregate of health insurance for any member up to ₹25,000, and medical expenditure on the health of any member up to ₹50,000, with the combined total not exceeding ₹50,000.
Sub-section (7) — medical expenditure only where there is no insurance
Where the amount is paid for medical expenditure on the health of a senior citizen under clause (2)(c), (2)(d) or (5)(b), the deduction is allowed only if no amount has been paid to effect or keep in force health insurance for that person. You cannot claim both the premium and the medical expenditure for the same senior citizen.
Sub-section (8) — the senior citizen limit and lump sum premiums
Where the insured person under clause (2)(a), (2)(b) or (5)(a) is a senior citizen, the ₹25,000 figure is substituted with ₹50,000. And where a premium is paid in a lump sum for more than one year, the deduction is allowed in each relevant tax year equal to the appropriate fraction of that amount.
Sub-section (9) — how you must pay
Payment must be made by any mode including cash for a preventive health check-up, and by any mode other than cash in all other cases. A premium paid in cash gets no deduction.
Sub-sections (10) and (11) — definitions and approved insurers
Appropriate fraction has one as the numerator and the total number of relevant tax years as the denominator. Family means the spouse and dependant children of the assessee — parents are dealt with separately. Relevant tax year is the year the lump sum is paid and the subsequent years the insurance remains in force. Sub-section (11) requires the health insurance to be under a scheme of the General Insurance Corporation approved by the Central Government, or of any other insurer approved by the IRDAI.
Worked example
An individual aged 45, with dependent parents aged 70 and 68, pays the following in tax year 2026-27.
| Payment | Amount | Deduction under section 126 |
|---|---|---|
| Health insurance for self, spouse and children | ₹28,000 | Restricted to ₹25,000 — clause (2)(a) |
| Preventive health check-up for self and family (paid in cash) | ₹7,000 | Restricted to ₹5,000 by sub-section (3), and cash is permitted under sub-section (9)(a); but the (2)(a) basket is already at ₹25,000, so nil further |
| Health insurance for parents (both senior citizens) | ₹46,000 | ₹46,000 — the ₹25,000 becomes ₹50,000 under sub-section (8)(a) |
| Medical expenditure on the 70-year-old parent | ₹38,000 | Nil — sub-section (7) bars it because insurance premium was paid for that parent |
| Total deduction | ₹71,000 |
The medical expenditure claim of ₹38,000 fails purely because a premium was also paid for that parent. Had the parents been uninsured, the ₹38,000 would have been deductible under clause (2)(d), subject to the ₹50,000 parents-basket ceiling in sub-section (4).
Note also the lump sum rule. A three-year policy premium of ₹60,000 paid in one go is not deductible in full in that year — sub-section (8)(b) spreads it as ₹20,000 in each of the three relevant tax years.
Compliance checklist and due dates
- Pay every premium by a mode other than cash; only preventive health check-ups may be paid in cash under sub-section (9).
- Keep the preventive check-up claim within the ₹5,000 sub-limit — it sits inside the ₹25,000, not on top of it.
- For a senior citizen, choose between the premium and the medical expenditure claim; sub-section (7) does not allow both.
- Apply the ₹50,000 ceiling separately to the self-and-family basket and the parents basket under sub-section (4).
- Spread multi-year lump sum premiums using the appropriate fraction in sub-section (8)(b).
- Confirm the insurer is approved by the Central Government or the IRDAI as sub-section (11) requires.
- Note that family means spouse and dependant children only — parents form the separate basket.
Common mistakes
- Treating the ₹5,000 check-up allowance as an addition to the ₹25,000 limit.
- Claiming both a senior citizen's insurance premium and their medical expenditure.
- Paying a premium in cash and expecting a deduction.
- Deducting a three-year lump sum premium entirely in the year of payment.
- Including parents within 'family' — sub-section (10)(b) confines it to spouse and dependant children.
- Assuming ₹1,00,000 is available as a single pool; it is two separate ₹50,000 ceilings.
This is an explanatory guide, not tax advice, and it does not reproduce the section in full. Read the bare text of the section before you rely on it, and check for later amendments, the Income-tax Rules made under the new Act, and CBDT circulars and notifications.