Investing in health insurance protects your family’s physical well-being and serves as an excellent financial tool to lower your taxable income. Under the Indian income tax framework, taxpayers can claim significant deductions for premium payments, preventive screenings, and supplemental health riders.
However, navigating these rules requires understanding specific eligibility criteria, payment modes, and the differences between the prevailing tax regimes.
Choosing the right Health Policy is one of the most important financial decisions a working professional or family can make, particularly as medical costs continue to rise across India. A solid Health Policy should cover hospitalisation, day-care treatments, and pre- and post-hospitalisation expenses, while clearly outlining any waiting periods or exclusions from the start. Star Health offers a wide range of Health Policy options — individual, family floater, and senior citizen plans — backed by a network of over 14,000 hospitals nationwide. Before finalising any Health Policy, it pays to compare the sum insured, room rent limits, and renewal terms rather than focusing solely on premium cost. Star Health’s Health Policy plans are known for transparent terms and a strong claim settlement track record, which matters most when a genuine medical emergency arises.
1. Understanding Section 80D and the New Section 126
For years, Section 80D of the Income Tax Act, 1961, has been the go-to provision for claiming health insurance premium deductions. Under the updated tax framework established by the Income Tax Act, 2025, these health-related tax advantages are reorganized under Section 126.
Important Note on Tax Regimes: These deductions under Section 80D or Section 126 are only available under the Old Tax Regime. If you opt for the New Tax Regime, these tax deductions are generally not available.
Who Can Claim These Deductions?
Deductions can be claimed by individual taxpayers, salaried employees, self-employed individuals, and Hindu Undivided Families (HUFs). You can claim benefits for premiums paid toward policies for:
Yourself
Your spouse
Dependent children
Parents (whether dependent or not)
Note: Premiums paid for siblings, grandparents, in-laws, or other relatives do not qualify.
2. Annual Deduction Limits Breakdown
The maximum tax break you can claim depends heavily on the age of the insured members. The limits are grouped annually as follows:
Special Provisions for Non-Resident Indians (NRIs)
NRIs who purchase health insurance in India are also eligible for a fixed tax break of up to ₹25,000 for premiums paid for themselves or their parents, regardless of whether the insured individuals are senior citizens.
3. Group Health Insurance vs. Multiple Policies
Can I Claim Tax Benefit on Employer-Provided Group Insurance?
Yes, but it depends strictly on who pays the premium.
Paid entirely by the employer: It functions as a tax-free prerequisite for the employee, meaning there is no direct tax deduction available to you under Section 80D.
Employee-funded upgrades: If you contribute partially to the premium, voluntarily add parental coverage, or purchase a super top-up or optional add-on past the base plan, your personal financial contribution is tax-deductible.
Can I Claim Benefits on More Than One Policy?
Absolutely. The Income Tax Act does not restrict the number of health insurance policies you can hold. If you maintain a personal family floater plan, a separate super top-up plan, and parental insurance, you can combine the premiums paid for all of these policies and claim them together, provided the total sum falls within your applicable annual ceiling.
4. Deductions for Add-ons, Extra Covers, and Check-ups
Health Insurance Riders & Add-ons
Premiums paid for health-related riders—such as critical illness, hospital cash, and top-up covers—qualify for deductions alongside your base policy. However, stand-alone travel insurance or pure life and accidental death benefit riders are typically excluded from this health tax bracket.
Preventive Health Check-Ups
To encourage proactive healthcare, the tax framework allows a deduction of up to ₹5,000 per year for routine medical examinations (like diabetes screening, blood tests, or lipid profiles).
This benefit can be claimed for screenings done for yourself, your spouse, children, or parents.
Crucial Clause: This ₹5,000 limit is not an additional benefit; it is integrated directly inside your standard ₹25,000 or ₹50,000 annual threshold.
5. Critical Compliance: Rules and Documentation
To ensure your tax deductions are accepted by tax authorities during verification, you must satisfy several strict criteria:
Non-Cash Payment Mode: All health insurance premium payments (including multi-year or rider premiums) must be made via digital or non-cash modes such as UPI, net banking, debit cards, credit cards, or cheques. Under Section 126(9)(b), cash payments for premiums are expressly disqualified from tax benefits. Exception: Preventive health check-ups can be paid for in cash and remain eligible.
GST Inclusions: The Goods and Services Tax (GST) charged on your medical policy premium forms part of the premium cost and is eligible for the tax deduction, subject to overall limits.
Multi-Year Proration: If you pay a multi-year premium upfront to secure long-term policy discounts, you cannot claim the entire chunk at once. Instead, the deduction is allowed on a proportionate basis divided equally across the financial years of the policy tenure.
Essential Documents to Keep Saved
Always download and maintain official records for return filing or future verification:
Final policy certificate and premium payment receipts (temporary receipts are not valid)
Clear breakup of employer/employee contributions (for group cover)
Receipts for preventive health check-up bills
Income slips or bank statement transaction proofs showing digital deduction
Final Review
While utilizing health insurance effectively mitigates the risk of sudden medical costs, aligning it with proper tax planning maximizes your hard-earned savings. Always inspect your premium receipts closely and consult a certified tax expert to verify your exact eligibility based on current amendments and policy wordings.
Before committing to any Health Policy, using a health insurance premium calculator is the most practical first step for any buyer. Star Health’s health insurance premium calculator lets you enter your age, location, family size, and desired sum insured to generate an instant, personalised premium estimate without speaking to an agent. Running different scenarios through the health insurance premium calculator helps identify the most cost-effective combination of sum insured and add-ons for your specific situation. Because factors like age and pre-existing conditions affect premiums differently across providers, using the health insurance premium calculator from Star Health gives a transparent and accurate starting point for comparison. Anyone evaluating plans should use a health insurance premium calculator before signing up, to avoid unexpected costs at renewal.
