The budget discussion has shifted towards what deductions and tax changes might be introduced when the Union Budget 2026 is presented on 1 February 2026. The spotlight is on Sections 80C, 80D, and other sections, where expectations are building around potential adjustments to limits and structure.
Among the analysts and market, there are hopes regarding an increase in standard deduction, expansion of health insurance, and investment deductions under Section 80D, and more tax-efficient FDs and NPS.
Keep going to understand these expectations around Budget 2026 expectations on 80C, 80D, and other taxation, and effectively plan your investment for the coming FY 2026-27.
Budget 2026 expectation
Budget 2026 expectations are towards selective tax relief rather than any sweeping changes. There is growing anticipation that the standard deduction might be increased from ₹75,000 to ₹1 lakh for offsetting inflation.
Additionally, investors are looking for a higher exemption limit on long-term capital gains, with discussions around raising it from ₹1.25 lakh to ₹2 lakh to support long-term wealth creation. And, with healthcare expenses climbing up, higher deductions under Section 80D are being sought, especially as medical inflation is estimated to be in the 11–14% range. There might also be some home loan interest relief for first-timers, which is being watched.
At the same time, revisions to income tax slabs are unlikely after the relief announced in Budget 2025.
Section 80c
Section 80C of the Income-tax Act, 1961 allows taxpayers to reduce their taxable income by claiming deductions on specific investments and payments of ₹1.5 lakh in a financial year. This section is applicable only under the old tax regime, and covers instruments such as PPF, ELSS, life insurance, ULIP, and many more.
2026 expectation
Experts and salaried taxpayers are expecting an increase in the deduction limit under Section 80C, which has remained at ₹1.5 lakh for years. According to the pre-budget commentary, there’s talk regarding a potential raise in this limit to ₹3 lakh, which would offer more meaningful relief for long-term investments.
Popular 80C instruments
| Instruments | What is it? | How does it qualify Section 80C? |
| Public Provident Fund (PPF) | Long-term government savings scheme | The ₹1.5 lakh overall 80C cap limits additional savings despite long lock-in and inflation impact |
| Equity-Linked Savings Scheme (ELSS) | Tax saving mutual fund | Market-linked products compete for space within the same limited 80C cap |
| Five-Year Bank/Post Office FD | Long-term fixed deposits | Returns reduce after tax, and the current 80C limit leaves little room for savings |
| Home Loan Principal Repayment | Principal amount of a housing loan | High property prices make the current deduction insufficient for homeowners |
| Senior Citizens Savings Scheme (SCSS) | Government schemes for seniors citizens | Fixed income needs have risen, while 80C limits remain unchanged |
Section 80D
Section 80D allows deductions on health insurance premiums paid for themselves, their family, and their parents. The deduction is available under the old tax regime and also includes a limited benefit for preventive health check-ups, making health insurance both protection and tax relief.
2026 expectation
- The current ₹25,000 deduction for self and family under Section 80D is expected to be raised to ₹50,000.
- The ₹50,000 limit for senior citizens may be increased to ₹1 lakh, in line with rising medical costs.
- There is an expectation that Section 80D benefits could be made available in the new tax regime in Budget 2026.
Benefits under Section 80D
- Health Insurance Premiums: Deduction of ₹25,000 for premiums paid, and up to ₹50,000 for senior citizens. An additional ₹25,000 is available for parents below 60, rising to ₹50,000 if they are senior citizens.
- Preventive Health Check-ups: Expenses on health check-ups are allowed up to ₹5,000.
- Senior Citizens and Disabilities: Medical expenses for senior citizens or persons with disabilities qualify for an additional deduction of up to ₹50,000.
- Overall Deduction Limit: The maximum deduction stands at ₹75,000 for individuals below 60 and can go up to ₹1,00,000 for senior citizens or persons with disabilities.
Section 80CCD
Section 80CCD allows individuals to claim tax payers’ deductions on the contributions made to the National Pension System (NPS) and notified pension schemes.
NPS contributions qualify for deduction up to 10% of basic salary plus DA for salaried individuals and up to 20% of income for the self-employed, subject to the combined ₹1.5 lakh ceiling under Section 80C. Additionally, taxpayers can claim an extra deduction of up to ₹50,000 for investments made in NPS under Section 80CCD(1B), which is separate from the ₹1.5 lakh limit.
NPS
Section 80CCD and National Pension Scheme (NPS) expectations:
- Increase in the ₹50,000 deduction to ₹1 lakh for NPS contributions.
- NPS tax benefits to be allowed under the new tax regime.
Expecting TDS Relief
Experts have a demand to reduce TDS for lower and middle-income taxpayers to ease cash flow pressure, and to raise the TDS exemption threshold to ₹5 lakh to limit unnecessary deductions at source.
Other Taxation
Beyond deductions and TDS relief, capital gains taxation is another area that draws attention ahead of Budget 2026. There’s this one expectation of a higher exemption limit for long-term capital gains (LTCG) tax, with proposals to raise it from the current ₹1.25 lakh to ₹2 lakh. Such a move would make long-term investing more rewarding, especially for retail investors who rely on equity markets to build wealth over time.
Conclusion
Budget 2026 so far suggests balanced tax adjustments without many structural changes. The expectations around an increase in the deductions limit and changes in Sections 80C, 80D, and 80CCD, relief on TDS, and a higher LTCG exemption could ease pressure on household finances while encouraging long-term investing and retirement planning. Now, for the taxpayers, focus shall be on aligning investments early to stay flexible.
