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As Budget 2026 approaches, expectations among taxpayers—especially the middle class—are running high. One of the biggest hopes revolves around Section 80C of the Income Tax Act, which allows individuals to save tax by investing in specific financial instruments. Reports suggest that the government may consider raising the current Section 80C deduction limit from ₹1.5 lakh to ₹3.5 lakh, offering substantial relief to salaried individuals and families.

The Union Budget will be presented on February 1, 2026, by Finance Minister Nirmala Sitharaman. With rising inflation and growing household expenses, taxpayers are keen to see whether the government addresses long-standing demands related to tax-saving deductions.

What Is Section 80C and Why Does It Matter?

Section 80C allows taxpayers opting for the old tax regime to claim deductions on investments made in popular savings instruments such as Public Provident Fund (PPF), Equity-Linked Saving Schemes (ELSS), life insurance premiums, National Savings Certificates (NSC), and certain post office savings schemes.

Currently, the maximum deduction under Section 80C is capped at ₹1.5 lakh per financial year—a limit that has remained unchanged for nearly a decade. During this period, costs related to education, healthcare, insurance, and retirement planning have risen sharply, reducing the real benefit of this deduction.

Will the Government Increase the 80C Limit?

Industry bodies have stepped in to push for reform. The American Chambers of Commerce in India (AMCHAM) has formally urged the government to increase the Section 80C limit to ₹3.5 lakh. According to AMCHAM, such a move would directly benefit salaried professionals and middle-income families who rely heavily on tax-saving investments to manage their finances efficiently.

If the government accepts this proposal, it could significantly boost disposable income for taxpayers while also encouraging disciplined, long-term savings.

Why Taxpayers Are Demanding a Higher Limit

At present, Section 80C benefits are available only under the old tax regime, while the new tax regime offers lower tax rates but no major deductions. Many taxpayers feel that although the new regime has been made attractive, those sticking with the old regime have not received meaningful relief in recent years.

Over the last 10 years, expenses related to children’s education, health insurance premiums, retirement planning, and life insurance coverage have increased substantially. In this context, a ₹1.5 lakh deduction limit is increasingly seen as insufficient.

Higher Limit Could Boost Savings and Investments

From a consumer perspective, increasing the Section 80C limit would not just help reduce tax liability—it would also encourage higher investments in safe and long-term financial products. A higher cap could strengthen retirement savings, improve insurance coverage, and promote financial stability among households.

AMCHAM has also suggested raising the tax deduction limit on life insurance premiums to at least ₹2.5 lakh, citing the growing importance of adequate insurance coverage in today’s uncertain environment.

All Eyes on February 1

With inflation squeezing household budgets and limited tax-saving avenues available, the middle class is hoping for decisive action in Budget 2026. If the government announces an increase in the Section 80C limit, it would be a major relief for taxpayers and could ease the overall tax burden to some extent.

As February 1 draws closer, expectations are mounting. A higher Section 80C limit could prove to be one of the most taxpayer-friendly announcements in Budget 2026, reinforcing the government’s focus on middle-class financial well-being.