Budget 2026: In addition to deductions, experts are also pushing for tax reforms related to capital gains and interest income to revive investor confidence. There is a need to introduce new savings instruments, such as gold deposit schemes.
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Tax experts are demanding a reset of long-term savings incentives in India’s budget. They argue that current provisions fail to keep pace with inflation, rising living standards, and changing employment patterns. Furthermore, they are demanding an increase in the tax deduction limit under Section 80C of the Income Tax Act. Currently, under the old income tax system, a tax deduction of up to ₹1.5 lakh per financial year can be claimed under this section. This limit has remained unchanged for more than a decade. Experts believe that this limit no longer meets the financial needs of middle-class families.
There is a strong hope that the tax deduction limit under Section 80C may be increased in Budget 2026. Furthermore, this benefit could be extended to the new tax system. Tax expert SR Patnaik believes that increasing the Section 80C deduction to account for long-term savings could strengthen retirement preparedness across all income groups.
Reforms are also needed in taxation related to capital gains and interest income.
In addition to deductions, experts are also pushing for tax reforms related to capital gains and interest income to revive investor confidence. Hari Raheja argues that relief in long-term capital gains tax, preferential tax treatment for long-term fixed deposits, and the reintroduction of tax-free dividends could boost participation in financial markets. New savings instruments, such as gold deposit schemes, should be introduced. More liberal reinvestment limits in housing are also needed to channel household wealth into productive assets.
Long-term savings should be separated from the Section 80C basket.
There is also a demand to separate true long-term savings from the Section 80C basket. Ritika Nayyar says that when multiple savings instruments compete for the same deduction limit, taxpayers often prioritize liquidity or deadline options over long-term goals. A dedicated sub-limit for retirement-centric products like PPF, NPS, and long-term government bonds could encourage disciplined, goal-based savings and reduce the tendency to resort to last-minute tax planning.
