Healthcare costs in
🔑 Key Features of Section 126
· Eligibility: Available to individuals (resident or non-resident, salaried, self-employed, or retired) and HUFs.
· Not applicable to: Companies, partnership firms, LLPs, or associations of persons.
· Modes of payment: Premiums must be paid through banking channels (not cash).
💰 Deduction Limits
Section 126 provides structured deductions under different sub-sections:
|
Category |
Deduction Limit |
Notes |
|
|
Self &
Family (below 60 years) |
Up to ₹25,000 |
Includes spouse, dependent children |
|
|
Parents (below
60 years) |
Up to ₹25,000 |
Separate deduction |
|
|
Senior Citizens
(self/family/parents) |
Up to ₹50,000 |
Covers medical expenditure if no insurance |
|
|
Preventive
Health Check‑up: |
Taxpayers may claim up to ₹5,000. |
Included within overall limits |
|
|
HUF Members |
Up to ₹25,000 (insurance) + ₹50,000 (medical expenses) |
Combined ceiling ₹50,000 |
|
⚖️ Comparison with Section 80D
· Continuity: Section 126 retains the essence of Section 80D but modernises the framework.
· Higher focus on senior citizens: Medical expenditure allowance ensures relief even without insurance.
· Separate bucket: Deductions under Section 126 are independent of Section 123 (₹1.5 lakh savings instruments), allowing taxpayers to maximise benefits.
📈 Practical Example
Suppose Mr Sharma, aged 45, pays:
· ₹20,000 for his family’s health insurance,
· ₹30,000 for his senior citizen parents’ medical expenses,
· ₹4,000 for preventive check-ups.
He can claim:
· ₹20,000 (self/family insurance),
· ₹30,000 (parents’ medical expenses),
· ₹4,000 (check-ups, within ₹5,000 cap).
Total deduction = ₹50,000.
🌟 Importance of Section 126
· Encourages financial planning: Taxpayers save while securing health coverage.
· Supports preventive healthcare: Deduction for check-ups promotes early diagnosis.
· Senior citizen relief: Addresses rising medical costs for elderly individuals.
· Tax optimisation: Works alongside other deductions without overlap.
🚨 Risks & Considerations
· Cash payments not eligible: Ensure premiums are paid digitally or via banking channels.
· Documentation required: Keep receipts for insurance and medical expenses.
· Cap limits: Preventive check-up claims cannot exceed ₹5,000.
· Exclusion of firms: Only individuals and HUFs benefit.
📝 Conclusion
Section 126, previously Section 80D, is a powerful tax-saving tool that simultaneously promotes health security. By offering deductions up to ₹50,000, it ensures taxpayers can reduce liability while safeguarding their families. As healthcare expenses continue to climb, Section 126 serves not merely as a tax advantage but as an essential safeguard for financial well‑being.
❓ Frequently Asked Questions
1. Who can claim deductions under Section 126? Individuals (resident or non-resident) and Hindu Undivided Families (HUFs) can claim deductions. However, companies, firms, and LLPs are not eligible.
2. Can senior citizens claim deductions without insurance? Senior citizens are eligible to claim deductions up to ₹50,000 for medical expenses, even when they do not hold a health insurance policy.
3. Are cash payments eligible for deduction? No. Premiums must be paid through banking channels such as net banking, debit/credit cards, or UPI. Cash payments are not allowed.
4. Is preventive health check-up covered? Yes. Preventive health check-ups up to ₹5,000 are included, but they form part of the overall deduction limit.
5. Does Section 126 overlap with Section 123 (savings instruments)? No. Deductions under Section 126 are independent of Section 123, allowing taxpayers to maximise benefits.
6. What documents are required to claim the deduction? Taxpayers must keep receipts of insurance premiums, medical bills, and check-up invoices as proof.
7. Why was Section 80D renamed to Section 126? The Income Tax Act, 2025, reorganised provisions for clarity and modernisation, renaming Section 80D as Section 126 while retaining its benefits.
