Health Insurance Taxation — Section 126 Deduction (old Section 80D) & GST
How health insurance premiums are treated for tax: the deduction under section 126 of the Income-tax Act, 2025 (old section 80D), its limits, the payment-mode condition, the old-regime restriction, and GST on premiums.
The deduction and where it sits
The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026. The deduction for health insurance premiums, which older material calls section 80D, is now section 126. It reduces taxable income by the premium paid, up to fixed limits.
It is available only under the old tax regime. The new regime is the default, and it does not allow this deduction. A person taxed under the new regime gets no income-tax benefit from the premium.
The limits
There are two separate baskets. The first covers premium for self, spouse and children: up to ₹25,000 a year, raised to ₹50,000 where the insured is a senior citizen, meaning aged 60 or above. The second covers premium for parents: up to ₹25,000, raised to ₹50,000 if they are senior citizens.
The most that can be claimed is therefore ₹50,000 + ₹50,000 = ₹1,00,000 a year, when the taxpayer and the parents are all senior citizens. A preventive health check-up counts up to ₹5,000 a year, but inside these limits; it is not an extra deduction.
How the premium is paid
The premium has to be paid by a non-cash mode such as cheque, card or online transfer. A premium paid in cash earns no deduction. The one exception is the preventive health check-up, which may be paid for in cash.
GST on the premium
GST is a separate tax, charged on the premium itself. Since 22 September 2025 it has been nil on individual health insurance policies, including family floater and senior citizen policies; before that it was 18%.
The exemption covers individual policies only. Group health policies, such as an employer's group cover, continue to bear GST at 18%.
Rules at a glance
Computing the deduction (assumed figures, old regime)
- Assume Deepa, 45, pays ₹22,000 by card as premium for herself, her husband and child, and ₹4,000 for a preventive health check-up. She also pays ₹48,000 online as premium for her parents, both aged over 60.
- Own family: ₹22,000 + ₹4,000 = ₹26,000. The check-up is within its ₹5,000 cap, but the basket limit is ₹25,000, so ₹25,000 is allowed.
- Parents: ₹48,000 is within the ₹50,000 limit for senior citizen parents, so ₹48,000 is allowed.
- Total deduction: ₹25,000 + ₹48,000 = ₹73,000.
Result. Deepa can deduct ₹73,000 under section 126 if she is taxed under the old regime; under the new regime the deduction is nil.
Key points
- The health premium deduction is in section 126 of the Income-tax Act, 2025 (section 80D of the 1961 Act).
- It is available only under the old tax regime.
- Limits: ₹25,000 for self, spouse and children (₹50,000 if a senior citizen) plus ₹25,000 for parents (₹50,000 if senior citizens).
- The maximum is ₹1,00,000 a year.
- A preventive health check-up counts up to ₹5,000 within the limits.
- Premium paid in cash is not deductible; only the check-up may be paid in cash.
- GST is nil on individual health premiums since 22 September 2025; group policies bear 18%.
Common misunderstandings
- The ₹5,000 for a check-up is not on top of the limit: it sits inside the ₹25,000 or ₹50,000.
- The deduction is not available to everyone who pays a premium: it exists only under the old regime.
- Paying the premium in cash does not qualify: only the preventive check-up may be paid in cash.
- Nil GST does not apply to every health policy: group policies still bear 18%.
- The income-tax deduction and GST are different taxes: one reduces taxable income, the other is charged on the premium.
Questions people ask
When is the full ₹1,00,000 reached?
When the taxpayer is a senior citizen and the parents are senior citizens too: ₹50,000 plus ₹50,000.
Is 80D still the right section to quote?
Under the Income-tax Act, 2025, in force from 1 April 2026, the provision is section 126. Section 80D is the old 1961 Act number.
Does a family floater get the nil GST rate?
Yes. Family floater and senior citizen policies are individual policies for this purpose.
What this lesson relies on
- Income-tax Act, 2025 — section 126; section 202 (new regime)
- GST Council decision effective 22 September 2025 (individual health and life insurance premiums)
This lesson was reviewed independently against these sources on 8 October 2026. Rules change: check the current regulation, scheme document or policy wording before relying on any figure. This is education, not advice.