Union Budget 2026: Rs 1.5 Lakh 80C Limit Since 2014? Why Budget 2026 Must Deliver These 4 Tax Reliefs?

Taxpayers and financial experts alike are already speculating about the coming reforms in personal income tax as the Budget 2026 gets closer. For most people, the expectation constitutes nothing less than a recalibration that would, among other things, establish tax thresholds and allowances that conform to the realities of inflation, changing lifestyles, and the gradual unity of India's dual tax systems.

The tax structure in India over the past ten years has been changing steadily but cautiously—the most remarkable shift was the new tax regime's implementation in 2020. Although the ruling was simplified, the issues of affordability and parity were still not settled.

The inflation has continuously shrunk purchasing power; therefore, most taxpayers have now switched from expecting only nominal adjustments to expecting real under-the-line-budget reliefs through the Union Budget.

Hike in Basic Deductions Long Overdue

The ceiling limit of 80C, which is the foundation of India's tax-saving scheme, was last modified in 2014. Over the last decade, the cost of living, housing EMIs, health insurance premiums, and education expenses have increased significantly, while the deduction limits have stood still.

Siddharth Maurya, Founder & Managing Director, Vibhavangal Anukulakara Pvt. Ltd., underscores this discrepancy as one of the major concerns:

"From the perspective of personal taxes, the main demand of the Budget 2026 is pretty clear: to sync the tax structure with the realities of inflation and income of the present day. The limit for Section 80C has been frozen at Rs 1.5 lakh for nearly ten years now, and the health insurance deductions allowed under Section 80D have also been kept at a very low level, which taxpayers have been enduring even though the costs of premiums, EMIs, and education have come up considerably. It is very sensible to demand a rise in the 80C limit to about Rs 3 lakh, a rise in the health insurance limits, and a rise in the income threshold for the highest 30% slab so the relief becomes even clearer to the families earning between Rs 10-35 lakh," said Siddharth Maurya.

A rise in these deduction limits, Maurya points out, would not merely aid the Indian middle-class households in coping with their soaring costs but would also inflate the spending in housing, insurance, and investment-linked sectors - all of them having a strong ripple effect on the economy.

Capital gains and rationalization demands

Maurya additionally emphasizes the urgency for a massive change in the tax structure surrounding capital gains, expressing the view that the current regime instils a great deal of confusion among different assets and holding periods:

"Rationalisation of capital gains taxes, mainly through the raising of tax-free LTCG exemption rather than the usual rate changes, would lure the small investors into long-term wealth creation without any impact on the market behavior," he argues.

In the same breath, industry professionals have pointed out that uniformity and openness in capital gains legislation are indispensable, because both retail and institutional investors want to be sure before the funds are tied up for a long time.

The Dual-Regime Dilemma

After almost four years of the new tax regime, the two systems still being apart leads to confusion and resistance. The new regime has lower rates and fewer deductions, but the old one is still the first choice of the Indian savings-oriented middle class that prefers such routes as PPF, ELSS, and home loan deductions.

Karthik Narayan, the Vice President - Title, Tax & Transition, Stellar Innovation, thinks that the upcoming budget is the right time to make this dualism simpler without bringing adverse disruption.

From the perspective of tax administration and transition, it is the perfect time through Budget 2026 to effect change that embodies the very simplicity and predictability that characterise the dual-regime of India.

Presently, a majority of the filers have chosen the new tax regime; therefore, the next step would be to make the slabs inflation-linked, pilot-test the Section 87A rebate thresholds, and eliminate the ambiguities that trouble the small taxpayers.

Thus, at the same time, gradually allowing any changes to the old regime rather than suddenly closing it is going to be the way to go along with the culture of savings in India, where 80C-type linked products still lead to the long-term goals.

Narayan goes on to say that the taxation scheme of capital gains and dividends is still one of the main reasons why a wider financial involvement should be encouraged:

"A common view to taxing capital gains and dividends with better indexation and reasonable exemptions for true retail investors may however be the core of coming up with an advanced financialisation without at the same time giving up on revenue or compliance quality," Karthik Narayan added.

Expectation of Simplification and Fairness

As we move towards Budget 2026, the dominant feeling among the taxpayers is that the government should maintain a balance between cost-saving measures and fairness. With India's growth still going strong and inflation taking a dip, this budget is a good opportunity to make structural improvements in individual taxation.

A reasonable increase in key exemption limits, a mechanism for slab adjustment linked to inflation, and a more taxpayer-friendly capital gains tax may finally connect the dots between reduced compliance and real economic advantages-thereby creating a more sustainable and just tax environment for Indian households.

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