Section 80D Becomes Section 126: Health Insurance Tax Rules 2026

Quick answer: From 1 April 2026 the Income-tax Act, 2025 replaced the Income-tax Act, 1961, and the health insurance deduction almost everyone knows as Section 80D is now Section 126. The money limits have not changed - Rs 25,000, Rs 50,000 and the Rs 5,000 preventive check-up cap all carry over intact. What has changed is the section number, the vocabulary (the Act now speaks of a "tax year"), and the question of which law applies to which return.

What actually changed on 1 April 2026

The Income-tax Act, 2025 is a rewrite of India's direct tax law, not a change in tax policy. Sections were renumbered and the drafting was simplified, but the substantive rules on health insurance were carried across almost word for word.

Under the old law the health insurance deduction sat in Section 80D of Chapter VI-A. Under the new law it sits in Section 126, Chapter VIII, titled "Deduction in respect of health insurance premia". If you have had "80D" filed away in your head for a decade, the practical translation is simple: same deduction, new number.

Which law applies to your return?

This is where most of the confusion sits in 2026, because two Acts are live at the same time for different periods.

• Your return for FY 2025-26 (assessment year 2026-27) - the one most individuals are filing during 2026 - is still governed by the Income-tax Act, 1961. You claim under Section 80D.
• Income earned from 1 April 2026 onwards (tax year 2026-27) is governed by the Income-tax Act, 2025. You will claim under Section 126 when you file that return next year.

So if your employer's declaration form or a tax article still says "80D", check which year it refers to before assuming something has gone wrong. Nothing about your policy or your eligibility changes because of the renumbering.

How much you can deduct under Section 126

Section 126 operates as two separate buckets that do not lend to each other. Understanding that structure is the whole game.

Bucket 1: you, your spouse and dependent children

• Health insurance premium, contributions to the Central Government Health Scheme (CGHS) or another notified scheme, and preventive health check-ups: up to Rs 25,000 in aggregate - section 126(2)(a).
• Medical expenditure incurred on the health of you or a family member: up to Rs 50,000 - section 126(2)(c).
• Combined ceiling for this bucket: Rs 50,000 - section 126(4).

Bucket 2: your parents

• Health insurance premium and preventive health check-ups for your parent or parents: up to Rs 25,000 - section 126(2)(b).
• Medical expenditure incurred on the health of a parent: up to Rs 50,000 - section 126(2)(d).
• Combined ceiling for this bucket: Rs 50,000 - section 126(4).

Where the person insured is a senior citizen - a resident individual aged 60 or above at any time during the tax year - the Rs 25,000 figure in those clauses is read as Rs 50,000 instead, under section 126(8)(a). That is how the widely quoted maximum of Rs 1,00,000 arises: Rs 50,000 in your own bucket plus Rs 50,000 in your parents' bucket.

Read the definition of "family" carefully. Section 126(10)(b) defines it as the spouse and dependant children of the taxpayer - nothing more. Siblings, parents-in-law and financially independent adult children do not fall into bucket 1, and parents-in-law do not fall into bucket 2 either. Premiums you pay for them earn goodwill, not a deduction.

If you are assessed as a Hindu Undivided Family

• Health insurance for any member of the HUF: up to Rs 25,000 - section 126(5)(a), read as Rs 50,000 where the insured member is a senior citizen.
• Medical expenditure on any member: up to Rs 50,000 - section 126(5)(b).
• Overall cap for the HUF: Rs 50,000 - section 126(6).

Five conditions that quietly disqualify claims

• The preventive check-up cap is Rs 5,000, and it sits inside the limits, not on top of them. Section 126(3) allows up to Rs 5,000 in aggregate for preventive health check-ups across clauses (2)(a) and (2)(b). It does not expand your Rs 25,000 or Rs 50,000 ceiling.
• Cash is not an accepted mode, except for check-ups. Section 126(9) permits cash only for preventive health check-up payments. A premium paid in cash earns no deduction, so pay by card, UPI, net banking or cheque and keep the receipt.
• Medical expenditure for a senior citizen is allowed only when there is no insurance in force for that person. Section 126(7) makes this explicit. If your senior-citizen parent has a health policy, you claim the premium - not out-of-pocket bills - for that parent.
• A multi-year premium is spread, not front-loaded. Under section 126(8)(b) read with section 126(10), a lump sum paid for a policy covering more than one year is deducted in equal fractions across each relevant tax year. Pay three years upfront and you deduct roughly a third each year, not the whole amount in year one.
• The insurer has to be an approved one. Section 126(11) requires the health insurance to be under a scheme of the General Insurance Corporation of India approved by the Central Government, or of any other insurer approved by IRDAI. Any regulated Indian health insurer meets this; informal medical subscription plans and hospital discount cards do not.

Old regime, new regime, and why this may not apply to you at all

Section 126 is a Chapter VIII deduction. Deductions of this kind are not available to a taxpayer being taxed under the default concessional regime, which now sits in Section 202 of the 2025 Act - the successor to Section 115BAC of the old Act. This mirrors the earlier position exactly, where Section 80D was closed off to anyone taxed under 115BAC.

Because most individuals are now defaulted into the concessional regime unless they actively opt out, a large share of health insurance buyers get no deduction on their premium at all. That is worth saying plainly: health cover is worth buying for the medical bill it absorbs, not for a tax break you may not be eligible to claim. If you are weighing regimes, run both computations on your own numbers and confirm your position on the official income tax e-filing portal or with a qualified tax professional.

One more change that affects the amount you claim

The deduction is on the amount actually paid. GST on individual life and individual health insurance policies was reduced from 18 per cent to nil with effect from 22 September 2025, as confirmed by the Department of Financial Services; group policies were not covered. For an individual policyholder the practical effect is that the gross premium fell, so the figure you enter in your return is smaller than it would have been at the earlier rate - the same cover, a lower outgo, and a slightly smaller deduction to match.

Frequently asked questions

Has the deduction amount been reduced under the new Act?

No. The limits in Section 126 are identical to those in Section 80D: Rs 25,000 and Rs 50,000 buckets, a Rs 5,000 preventive check-up sub-limit, and a Rs 1,00,000 theoretical maximum for an individual with senior-citizen parents.

Do I need to do anything with my existing policy because of the renumbering?

No. Your policy, its waiting periods and its renewal terms are governed by insurance regulation, not by the Income-tax Act. Nothing about the 2025 Act requires you to change, port or re-buy cover. Our health insurance hub covers what does affect your policy terms.

Can I claim for my parents-in-law?

No. Section 126(2)(b) refers to "the parent or parents of the assessee". Parents-in-law are outside both buckets, however genuinely dependent they may be.

What is a "tax year"?

The 2025 Act replaces the older pair of terms - previous year and assessment year - with a single "tax year", which is the twelve-month period beginning 1 April in which the income is earned. Tax year 2026-27 is the year that began on 1 April 2026. You will see this term used throughout Section 126.

I paid a two-year premium in March 2026. Which section applies?

The portion attributable to the year ending 31 March 2026 falls under the 1961 Act and is claimed as Section 80D in that return; the portion attributable to the following year falls under Section 126. The proportionate-spreading rule exists in both Acts, so the arithmetic does not change - only the label does. If your situation is more complicated than this, take professional advice rather than guessing.

Where can I check the exact statutory text?

The Income Tax Department publishes the full text of every section of the Income-tax Act, 2025 on its own website, and that is the version to rely on if a commentary and the statute appear to disagree. If a term in your policy is unclear, our insurance glossary explains the common ones.

Sources

Statutory text of Section 126, Income-tax Act, 2025, as published by the Income Tax Department, Government of India (incometaxindia.gov.in); the Department of Financial Services, Ministry of Finance, on the exemption of GST on individual life and health insurance policies from 22 September 2025; and commentary from ClearTax and Business Today on the renumbering of Section 115BAC to Section 202. NewEdgePolicy is an independent insurance education publisher and does not sell policies; this is general information, not tax advice. See our editorial and trust page for how we research content.