Budget 2026: ICAI suggests health insurance deduction in new tax regime. What's the current rule?

The most significant proposal related to personal finance is the request to allow deductions for medical insurance premiums under the default tax regime, which is the new tax regime.

"Increase in surcharge threshold and provision of deduction for medical insurance premium paid and expenditure on maintenance of dependent disabled under the default tax regime for individuals," ICAI suggested in its pre-budget meeting.

CA. Charanjot Singh Nanda, President, ICAI, said: "ICAI has always been at the forefront of nation-building and continues to work closely with the Government as its trusted knowledge partner. Through our Pre-Budget Suggestions for 2026-27, we aim to support a tax ecosystem that promotes ease of doing business, drives sustainable growth and strengthens India’s journey towards a resilient and green economy".

Is there any health insurance deduction in the new tax regime?

No, under the existing Income Tax law, the deduction for health insurance premiums under Section 80D is not available if you opt for the new regime.

The new tax regime, which is now the default option for taxpayers, offers individuals significantly lower tax slab rates in exchange for foregoing deductions and exemptions.

Taxpayers opting for the old income tax regime can claim a deduction under Section 80D for premiums paid for themselves, their family, and their parents.

• Up to ₹25,000 for self, spouse, and dependent children (if all are below 60 years of age).

• Up to ₹50,000 for self/family (if the eldest member is 60 or above).

• An additional deduction of up to ₹25,000 for parents (below 60 years) or ₹50,000 for senior citizen parents (60 years or above).

Budget 2026: Other key suggestions from ICAI

Pre-Budget consultation meetings with leading economists, industry bodies (like CII, FICCI), and farmer organizations have already begun, starting in early November 2025. The Union Budget for 2026-27 is typically presented on February 1 of each year. Smt. Nirmala Sitharaman is expected to present the Budget in Parliament on February 1, 2026.