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As the presentation of the Union Budget 2026 draws closer, expectations among taxpayers are steadily rising. With the government keen on promoting the new income tax regime as the default framework, experts believe it is equally important to address the practical challenges faced by individuals—especially those planning for retirement and old age.

Rising life expectancy, increasing healthcare costs, and limited post-retirement income sources have made financial security a major concern for Indian households. Against this backdrop, demands are growing for enhanced tax benefits on health insurance, pensions, and senior citizen savings to create a more inclusive and sustainable tax system.

Why Budget 2026 Matters for Taxpayers

Over the years, inflation—particularly medical inflation—has eroded household savings. Individuals are now living longer and spending more on healthcare, insurance, and retirement planning. Unlike earlier generations, many retirees today must manage their expenses independently without guaranteed pension income.

This makes it critical for Budget 2026 to focus on:

• Improving insurance affordability

• Strengthening long-term retirement savings

• Providing meaningful tax relief to senior citizens

1. Higher Deduction Needed for Health Insurance Premiums (Section 80D)

Health insurance premiums have risen sharply in recent years due to:

• Increasing medical costs

• Higher claim ratios

• Expanded coverage requirements

However, tax deductions under Section 80D have remained unchanged for a long time. Currently, taxpayers can claim:

• ₹25,000 for self and family

• An additional ₹25,000 for parents

• Up to ₹50,000 if parents are senior citizens

In reality, comprehensive family health insurance policies often cost between ₹40,000 and ₹60,000 annually, making the existing deduction insufficient.

Expectation from Budget 2026:

• Increase deduction for self and family to ₹50,000

• Raise the limit for senior citizen parents to ₹75,000

This revision would better reflect current healthcare costs and encourage wider insurance coverage.

2. Strengthening Pension and Retirement Savings

Retirement planning remains one of the weakest pillars of personal finance in India. While certain reforms have been introduced, gaps still exist.

At present:

• Transfers from Superannuation Funds (SAF) to NPS are tax-free

• Transfers from Provident Fund (PF) to NPS attract tax

Experts argue that PF-to-NPS transfers should also be made tax-exempt to enable smoother retirement planning.

Additionally:

• Employee contribution deductions in National Pension System (NPS) are limited

• From FY26, employer contribution limits under the new regime have been raised from 10% to 14%

• Employees, however, do not get similar tax benefits for their own contributions

Budget expectations include:

• Tax-free PF to NPS transfers

• Higher deduction limits for employee NPS contributions

• Greater incentives for long-term retirement savings

Such measures would promote disciplined savings and reduce financial stress after retirement.

3. Greater Relief for Senior Citizens

Senior citizens are among the most financially vulnerable groups due to:

• Rising inflation

• Escalating medical expenses

• Dependence on fixed income sources

Under the old tax regime, senior citizens receive:

• Deduction of up to ₹50,000 on interest income under Section 80TTB

• Higher basic exemption limits

However, bank fixed deposit returns often struggle to beat inflation, and interest income remains the primary source of livelihood for many retirees.

Key expectations from Budget 2026:

• Extend Section 80TTB benefits to the new tax regime

• Increase basic exemption limits for senior citizens

• Provide uniform tax relief regardless of tax regime

Towards a More Balanced Tax System

As the government positions the new tax regime as the future, it becomes essential to ensure that social protection measures are not diluted. Enhanced deductions for health insurance, stronger retirement incentives, and senior citizen-focused tax relief can help build a fair and inclusive tax framework.

A balanced reform agenda that combines simplicity with adequate social security will go a long way in strengthening trust among taxpayers.