Section 126 of the Income Tax Act, 2025 is implemented by the government to promote and make quality healthcare accessible. Under Section 126, an individual can claim tax deductions from their annual income for the premiums they pay while buying health insurance.
Tax deductions under Section 126 cover the insured individual as well as their family members. Senior citizens can claim higher deductions. Section 126 also covers deductions for preventive health check-ups.
Read on to know more about the benefits of Section 126 and its tax deduction structure.
Benefits of Section 126 Tax Deductions
Some of the benefits of tax deductions under Section 126 include the following.
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Deductions on Health Insurance Premiums
You can claim deductions on the premiums you pay for a health insurance plan. It is also extended to premiums paid for a health rider of a term plan. This lets you choose the health insurance plan you want without worrying about expensive premiums.
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Coverage for Family Members
Tax deductions under Section 126 cover multiple members of your family. Apart from yourself, those eligible for deductions include your spouse, dependent children, and parents. Thus, you can opt for family plans or family-specific riders even if they mean paying an extra amount.
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Benefit for Senior Citizens
Senior citizens are usually at higher risk of health issues. Therefore, health policies that cover senior citizens may often charge higher premiums. Individuals above 60 years of age can claim higher tax deductions.
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Preventive Health Check-Up
Routine health check-ups are necessary to prevent medical conditions or detect them early for better treatment. Thus, preventive health check-ups are also eligible for tax deductions. This encourages people to avail check-ups routinely and take better care of themselves.
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Pre-Existing and Critical Illness Cover
Premiums paid for eligible pre-existing disease coverage or critical illness riders may qualify for tax deductions. If your current policy no longer meets your needs, health insurance portability can help you switch insurers while retaining eligible continuity benefits, subject to applicable rules.
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Multi-Year Premiums
Section 126 is also applicable if you pay a lump-sum premium for a multi-year health insurance policy. The deductions will be calculated proportionately across the policy years.
The tax benefits under Section 126 serve as an incentive for people to invest in health insurance. The deductions encourage people to buy health insurance plans from reliable companies like Bajaj General Insurance to secure financial safety during medical crises.
What is the tax deduction structure under Section 126?
If you are wondering how tax deductions are structured under Section 126, here is a breakdown:
- The maximum tax deduction amount you can claim for yourself, your spouse, and your children or parents who are dependent on you is ₹25,000 per year if the covered members are below 60 years of age.
- For senior citizens, the deduction limit goes up to ₹50,000, whether it is for yourself or your parents. This is applicable if even one of your parents is above 60 years.
- If both you (you can include your spouse and children) and your parents are both below 60 years, the maximum tax deduction you can claim is ₹50,000.
- If you are below 60 years of age and your parents are 60 or above, the maximum deduction you can claim is ₹75,000.
- If both you and your parents are senior citizens, the maximum deduction amount you can claim is ₹1,00,000.
- Tax deduction of ₹5000 for preventive health check-ups is included within the maximum deduction limits. It is not counted additionally.
Final Thoughts
Section 126 offers significant tax savings for individuals and families. Not only does it encourage people to buy health insurance, but it also ensures that your finances are not drained in doing so.
No matter what policy you choose, the premium is eligible for a tax deduction, provided that all the conditions are met. With medical costs on the rise, it is essential to take advantage of health insurance and claim your tax deductions.