Insurance, ELSS and tax, in plain words.

First, the regime

Since the 2023 budget the new tax regime is the default: lower rates, and almost no deductions. The premium deductions below need the old regime, which you choose when you file. Which one leaves you better off depends on your income and how much you would claim; it is worth working out both.

From 1 April 2026 the Income-tax Act, 2025 replaced the Income-tax Act, 1961 and renumbered its sections. The sections named here are the familiar 1961 ones; the limits carried over unchanged.

Health insurance premiums (Section 80D)

• Up to ₹25,000 a year for yourself, your spouse and dependent children; ₹50,000 if you or your spouse is 60 or over.
• A further ₹25,000 for your parents’ policy; ₹50,000 if either parent is 60 or over. Most a family can claim: ₹1 lakh.
• Preventive health check-ups count up to ₹5,000 within those limits, not on top of them.
• Premiums must be paid other than in cash; a check-up may be paid in cash.

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Life insurance premiums (Section 80C)

Premiums count toward the ₹1.5 lakh a year shared with provident fund, PPF, ELSS and other 80C items. For a policy issued since April 2012, the premium counts only up to 10% of the sum assured.

When a payout is tax-free (Section 10(10D))

• A death benefit paid to the nominee is tax-free.
• A maturity payout is tax-free when the premium was within 10% of the sum assured — but not for a non-ULIP policy issued from 1 April 2023 once its yearly premiums exceed ₹5 lakh, or a ULIP issued from 1 February 2021 once they exceed ₹2.5 lakh.
• This exemption applies under either regime.

ELSS mutual funds (Section 80C)

An equity-linked savings scheme counts toward the same ₹1.5 lakh, with a three-year lock-in, the shortest among 80C options. Gains are long-term capital gains: tax-free up to ₹1.25 lakh a year across equity investments, and taxed at 12.5% above that. Returns depend on the market and are not guaranteed.

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