Non-resident Indians (NRIs) can claim tax deductions for health insurance premiums paid for their parents under Section 126 of the Income Tax Act. To avail of this benefit, taxpayers must opt for the old tax regime, as the deduction is unavailable under the default new tax structure. Only premiums paid to IRDAI-approved Indian insurers are eligible.
Non-resident Indians (NRIs) looking to manage their tax liabilities while covering healthcare costs for their parents now have clearer guidance under the updated income tax framework. With the transition from Section 80D to Section 126 of the Income Tax Act, 2025, which became effective from the financial year starting April 1, 2026, the rules for claiming deductions on health insurance premiums have been streamlined.
Deduction Limits and Age Criteria
The deduction allows taxpayers to claim benefits for health insurance premiums paid for their parents, regardless of whether the parents are residents of India or not. The amount a taxpayer can claim depends on the age of the parents covered by the policy. If the parents are aged below 60, the deduction limit is up to ₹25,000. For parents aged 60 or older, the deduction limit increases to up to ₹50,000. These amounts are exclusive of any deductions claimed for the taxpayer's own family health insurance, allowing for additional tax efficiency.
Important Conditions for Eligibility
There are several conditions that NRIs must satisfy to qualify for these deductions. The most significant constraint is the choice of the tax regime. These deductions under Section 126 are strictly available only to those who choose the old tax regime when filing their income tax returns. Taxpayers who opt for the default new tax regime will not be able to claim these health insurance deductions.
Another critical requirement is the source of the insurance. The policy must be issued by an insurance company approved by the Insurance Regulatory and Development Authority of India (IRDAI). Premiums paid to insurance providers operating outside of India are not eligible for this deduction. Furthermore, the payment of the premium must be made through non-cash modes, such as net banking, debit cards, credit cards, or cheques, to be recognized for tax purposes.
Monitorables for Taxpayers
For NRIs, the primary challenge often lies in maintaining proper documentation and navigating cross-border financial processes. It is essential to ensure that the insurance policy is purchased from an IRDAI-regulated entity to avoid rejection of claims during tax assessment. Additionally, taxpayers should be mindful of the potential for mis-selling when purchasing insurance remotely. Relying on verified documentation from the insurer and ensuring the payment is made via approved banking channels are steps that can help maintain compliance. As tax rules can be subject to further updates or clarifications, keeping track of filings and official circulars from the income tax department is recommended for accurate tax planning.