TL;DR: Health insurance premium deduction under the Income-tax Act, 2025 (effective Tax Year 2026-27) sits in Section 126 — the renumbered successor to Section 80D of the 1961 Act. The buckets are unchanged: Rs. 25,000 for self, spouse and children (Rs. 50,000 if any insured is a senior citizen) plus a separate Rs. 25,000 / Rs. 50,000 for parents. Maximum aggregate Rs. 1,00,000. Preventive health checkup gives Rs. 5,000 inside the bucket, not on top. If a senior-citizen parent has no health insurance, you can claim up to Rs. 50,000 of actual medical expenditure within the parent bucket. Old regime only — under Section 202 (was §115BAC) the new regime, this deduction is gone. Cash payments don't qualify, except for the Rs. 5,000 preventive checkup.

The 30-Second Summary

The most-claimed deduction in salaried India after Section 80C / Section 123 is health insurance. The 2025 Act has not changed any of the substance — only the section number, from Section 80D to Section 126. The traps recur every season: families paying premium in cash (disallowed), claiming Rs. 5,000 preventive checkup as additional deduction (it's inside the bucket), missing the senior-parent Rs. 50,000 medical-expenditure carve-out for parents without insurance, and worst — opting into the new regime without realising they have just thrown away Rs. 1 lakh of deductions.

1. The Section 126 Bucket Structure

Section 126 organises the deduction into two independent buckets:

Bucket Who is covered Limit (no senior) Limit (senior) Self bucket Self, spouse, dependent children Rs. 25,000 Rs. 50,000 (if any insured is 60+) Parents bucket Parents (whether dependent or not) Rs. 25,000 Rs. 50,000 (if any parent is 60+) Maximum aggregate (both buckets together) Rs. 1,00,000 (Rs. 50K + Rs. 50K when both buckets are senior-citizen)

The buckets are independent. Even if you don't claim the self bucket, you can still claim the parents bucket. Even if your parents are not your dependents, you can claim the parents bucket if you actually pay their premium.

What counts as a "senior citizen"?

An individual who is 60 years of age or above at any time during the tax year. The age is tested per insured person, not on the policyholder. So if you are 35 but your father (insured under your parents-bucket policy) is 67, that policy gets the Rs. 50,000 senior-bucket limit.

2. The Rs. 5,000 Preventive Health Checkup — Inside, Not On Top

Section 126 allows up to Rs. 5,000 per family per tax year for preventive health checkup expenses — covering self, spouse, dependent children, and parents. This Rs. 5,000 is included within the bucket limits, not added on top.

Two important practical points:

  • Cash is allowed for the preventive checkup portion only. Premium payments must be non-cash; preventive checkup is the lone exception.
  • If your full bucket is already exhausted by premium (e.g., Rs. 25,000 of self-family premium, no senior), the Rs. 5,000 preventive checkup gives no incremental deduction. The Rs. 5,000 only "lifts" you toward the cap if you were below it.

Example: self-family premium Rs. 22,000 + Rs. 5,000 preventive checkup. Bucket limit Rs. 25,000. Total claimable = Rs. 25,000 (Rs. 22,000 premium + Rs. 3,000 of preventive). The remaining Rs. 2,000 of preventive is wasted.

3. The Rs. 50,000 Senior-Parent Medical Expenditure Carve-Out

One of the most under-claimed Section 126 benefits. If your parents (or you / spouse if 60+) are senior citizens and have no health insurance, you can claim up to Rs. 50,000 of actual medical expenditure incurred on their treatment in lieu of premium — within the senior-bucket Rs. 50,000 limit, not on top.

What qualifies as "medical expenditure"?

  • Doctor consultation fees
  • Hospitalisation expenses
  • Medicines
  • Diagnostic tests, scans
  • Specialist treatment

Conditions:

  • The senior citizen must not have any health insurance in the relevant tax year. If even a basic Rs. 5,000-premium policy exists, this carve-out does not apply — you fall back to the regular premium deduction.
  • The expenditure must be paid in non-cash mode (cheque, online, card). Cash medical bills do not qualify.
  • The senior must be 60+ at any time in the tax year.

This carve-out targets a real demographic: many senior parents either could not get health insurance (pre-existing conditions, age) or chose not to. Their medical bills are real. Section 126 lets you claim up to Rs. 50,000 of those bills as a parents-bucket deduction.

4. The Single-Most-Expensive Mistake — Cash Premium Payment

Section 126 explicitly disallows premium paid in cash. Acceptable modes: cheque, demand draft, NEFT, RTGS, IMPS, UPI, debit / credit card, net banking, UPI auto-debit. Branch counter cash payment? Disallowed.

This catches families who:

  • Pay parents' premium in cash at the insurance branch (often happens for senior citizens uncomfortable with online).
  • Reimburse a parent who paid in cash — the deduction belongs to whoever actually paid; if the parent paid in cash, the deduction is lost in everyone's hands.
  • Use cash to settle insurance broker invoices that the broker then sends online — trace the chain; if your payment leg was cash, you may not qualify.

Only the Rs. 5,000 preventive checkup is permitted in cash — the rest must be in non-cash modes.

5. Multi-Year Single Premium — Proportionate Spreading

Many insurers offer multi-year policies (2-year or 3-year terms) at a discount. Section 126 (carrying forward the §80D rule) spreads the deduction proportionately across the years of cover.

Formula: Deduction available in each tax year = Total premium paid ÷ Number of years of cover, capped at the bucket limit per year.

Example: 3-year self-family policy, total premium Rs. 60,000 paid in November 2026. No senior citizen.

  • Annual deduction = Rs. 60,000 / 3 = Rs. 20,000.
  • Claim Rs. 20,000 in TY 2026-27, Rs. 20,000 in TY 2027-28, Rs. 20,000 in TY 2028-29.
  • Each year's claim is within the Rs. 25,000 self-bucket limit, so all three Rs. 20,000 instalments are fully claimable.

Without the spreading rule, you would have claimed only Rs. 25,000 once (the cap), losing Rs. 35,000 of deduction. The proportionate rule preserves the full benefit over the policy term.

6. New Regime (Section 202) — The Deduction Is Gone

This is the cliff. Under the new regime introduced by Section 202 of the 2025 Act (was §115BAC of 1961 Act), Section 126 / Section 80D deduction is NOT available. The new regime tradeoff is broader Rs. 4 lakh basic exemption + Rs. 60,000 / Rs. 12 lakh rebate under Section 156, but at the cost of nearly all Chapter VI-A / Section 123-onwards deductions including Section 126.

For families with elderly parents and high health insurance premiums, the old regime continues to be the better choice unless their other deduction load is low. We cover the break-even math in detail in our companion piece on Old vs New Tax Regime — Which Should You Choose.

7. Worked Examples

Example A — All Under 60, Old Regime

Rajeev (35), wife (33), two children. Self-family floater premium Rs. 22,000. Father (58) and mother (55) covered by separate parents-bucket policy with premium Rs. 28,000. Preventive checkup spending Rs. 3,000 (combined for whole family).

Self bucket: Rs. 22,000 + Rs. 3,000 preventive (within Rs. 25,000 cap) = Rs. 25,000.

Parents bucket: Rs. 28,000 capped at Rs. 25,000. Rs. 3,000 of premium not claimable (over cap; not senior).

Total Section 126 deduction: Rs. 50,000.

Example B — Self Senior, Parents Senior, Old Regime

Aruna (62), husband (65). Self-family premium Rs. 42,000. Aruna's mother (87) under the parents-bucket policy with premium Rs. 48,000. Preventive checkup Rs. 4,000 (entire family).

Self bucket (senior cap Rs. 50,000): Rs. 42,000 + Rs. 4,000 preventive = Rs. 46,000 (within cap). Rs. 46,000.

Parents bucket (senior cap Rs. 50,000): Rs. 48,000 (within cap). Rs. 48,000.

Total: Rs. 94,000. Just shy of the absolute Rs. 1,00,000 ceiling.

Example C — Senior Parent Without Insurance

Vivek (40), self-family premium Rs. 18,000. Father (72) is uninsurable due to pre-existing conditions; Vivek paid Rs. 65,000 for father's hospitalisation, scans, and medication during the year, all by online transfers and card.

Self bucket: Rs. 18,000.

Parents bucket (senior carve-out for medical expenditure when no insurance, capped Rs. 50,000): Rs. 50,000.

Total: Rs. 68,000. Without the senior-parent medical expenditure carve-out, this family would have lost Rs. 50,000 of deduction.

Example D — HUF Claim

The Sharma HUF (Karta is 55) pays health insurance premiums of Rs. 30,000 for the Karta and Rs. 42,000 for the Karta's mother who is 78 and a member of the HUF.

HUF is eligible under Section 126 in the same way as an individual. The HUF claims:

  • Karta bucket (under 60): Rs. 30,000 capped at Rs. 25,000.
  • Senior member bucket: Rs. 42,000 within Rs. 50,000 cap = Rs. 42,000.
  • Total HUF Section 126 deduction: Rs. 67,000.

Note: the individual Karta in his own ITR may have separate health insurance and claim his own Section 126 deduction in his individual return. The HUF's claim is independent of the Karta's individual claim.

Example E — Cash Payment Trap

Suresh (40) pays his parents' premium of Rs. 30,000 in cash at the branch counter (parents are senior citizens, mother is 70).

Parents bucket: Rs. 0. Cash payment disqualifies the entire premium. No "partial allowance" — the deduction is fully lost on this leg. Suresh could have paid Rs. 5,000 toward preventive health checkup in cash, but premium itself must be non-cash.

Example F — New Regime Choice Killing the Deduction

Same facts as Example B (Rs. 94,000 of premium + preventive). Aruna picks the new regime under Section 202.

Section 126 deduction: Rs. 0. She gets the larger Rs. 4 lakh basic exemption and the Section 156 rebate up to Rs. 12 lakh, but she lost the entire Rs. 94,000 health-insurance shield. Whether this trade is worth it depends on her total deduction picture — covered in our regime-comparison piece.

8. Common Mistakes

  • Adding preventive checkup as Rs. 5,000 extra. It's inside the bucket, not on top.
  • Paying premium in cash. Lost. Period.
  • Claiming senior-parent medical expenditure when senior parent has any insurance. Carve-out does not apply — even a Rs. 3,000 small policy disqualifies the Rs. 50,000 medical-expenditure route.
  • Reimbursing a parent who paid premium themselves. Deduction goes to whoever paid. If parent paid, parent claims (or nobody does, if parent isn't a taxpayer).
  • Forgetting the multi-year proportionate rule. Lump-sum 3-year premium claimed only in year 1 ⇒ loses years 2 and 3 of deduction.
  • Buying a corporate group health policy and claiming personally. The premium paid by employer (gross-up scenarios aside) doesn't qualify as your premium for Section 126; you cannot claim it.
  • Senior parent under separate spouse's policy. Section 126 deduction belongs to the person actually paying the premium, not necessarily the policyholder. Match the cheque trail with the claim.
  • Missing the cap when both buckets are at senior level. Maximum aggregate is Rs. 1,00,000, not Rs. 1,05,000 (preventive is included).
  • Opting into new regime by inertia. New regime is the default. Old-regime election must be made affirmatively in the ITR. Under new regime, Section 126 is gone — for many families with elderly parents, that costs more than the regime saves.
  • Children above the dependent age claimed in self bucket. Section 126 covers dependent children. Adult independent children should claim their own Section 126 in their own returns.

9. Practitioner Checklist

  1. Confirm regime choice. Section 126 is old-regime only.
  2. Map the family: self, spouse, dependent children, parents (separately).
  3. Identify senior citizens (60+ at any point in TY).
  4. Tally premiums per bucket. Cap at Rs. 25,000 / Rs. 50,000 each.
  5. Add preventive health checkup expenses (max Rs. 5,000 family-total) inside the bucket.
  6. For senior parents without insurance: substitute the Rs. 50,000 medical-expenditure carve-out within the parents bucket.
  7. Verify all premium payments are non-cash. Preventive checkup may be cash.
  8. For multi-year policies, divide the lump-sum premium across policy years.
  9. For HUFs, claim separately from the Karta's individual return.
  10. Cross-check final aggregate claim against Rs. 1,00,000 ceiling.

10. Bottom Line

Section 80D under the 1961 Act becomes Section 126 under the Income-tax Act, 2025 — same numbers, same rules, new section number. The deduction is one of the highest-impact in the old-regime arsenal: Rs. 1 lakh maximum for a couple with senior parents is real money saved at any meaningful slab. The expensive errors are predictable: cash payment, double-counting preventive checkup, missing the senior-parent medical expenditure carve-out, and most significantly, opting into the new regime without checking what you give up.

If your family includes senior parents or your own household premium runs into five figures, the old regime + Section 126 is almost certainly the right call. Run the math before you tick the regime box on your ITR.

11. Legal References

  • Income-tax Act, 2025 — effective Tax Year 2026-27 (1 April 2026).
  • Section 126, Income-tax Act, 2025 — deduction in respect of health insurance premia. Successor to Section 80D of the 1961 Act. Substantively unchanged: Rs. 25,000 / Rs. 50,000 (senior) self-bucket; Rs. 25,000 / Rs. 50,000 (senior) parents-bucket; Rs. 5,000 preventive health checkup within bucket; Rs. 50,000 medical expenditure carve-out where senior is uninsured. Maximum aggregate Rs. 1,00,000.
  • Section 202, Income-tax Act, 2025 — new tax regime; default for individuals and HUFs from FY 2025-26 onwards. Excludes most Chapter VI-A / Section 123-onwards deductions including Section 126. Successor to Section 115BAC of the 1961 Act.
  • Section 156, Income-tax Act, 2025 — new-regime rebate for resident individuals (Rs. 60,000 / Rs. 12 lakh). Successor to Section 87A. HUFs are not eligible for Section 156 rebate.
  • Old-Act anchors: Section 80D and proviso clauses of the Income-tax Act, 1961; Rule 11DD of the Income-tax Rules, 1962 (specified diseases for Section 80DDB; not Section 80D, but commonly conflated).
  • Cash payment disallowance: continued under Section 126 of the 2025 Act, mirroring the §80D(2B) wording of the 1961 Act. Preventive checkup is the only cash-permissible item.

For multi-policy families, employer-sponsored corporate plans bridging individual policies, NRI taxpayers paying premium for resident parents, and HUFs with senior coparceners, consult a qualified financial planner or chartered accountant. Confirm exact Section 126 wording, Schedule entries (where applicable), and the latest CBDT clarifications before relying on this summary for a specific filing.