Income Tax Budget 2026: The American Chambers of Commerce in India (AMCHAM) has recommended the government increase the tax-savings deduction limit to ₹2.5 lakh annually. Currently, investments in tax-saving instruments allow a maximum deduction of ₹1.5 lakh per financial year.
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Income Tax Budget 2026: Taxpayers could receive a significant boost in the Union Budget 2026. The tax-saving deduction limit could be increased to ₹2.5 lakh. Finance Minister Nirmala Sitharaman will present the Union Budget for the ninth consecutive time on February 1st. In the previous Union Budget, she provided a significant boost to taxpayers by making income up to ₹12 lakh tax-free.
The current deduction limit is ₹1.5 lakh annually.
The American Chambers of Commerce in India (AMCHAM) has recommended the government increase the tax-saving deduction limit to ₹2.5 lakh annually. Currently, a maximum deduction of ₹1.5 lakh per financial year is allowed for investments in tax-saving instruments. This deduction can be claimed under Section 80C of the Income Tax Act. This tax benefit was available only under the old income tax regime.
Section 80C covers a wide range of investment options.
Section 80C covers nearly a dozen investment options. These include mutual fund tax savings schemes (ELSS), life insurance policies, and PPF. Deductions are also allowed for tuition fees for up to two children under this section. Furthermore, deductions on home loan principal can also be claimed under Section 80C. Amcham states that the deduction limit under Section 80C has not been increased since 2014. During this period, people’s incomes have increased, leading to an increase in the tax burden.
Increasing the deduction limit will boost savings.
If the government increases the deduction limit under Section 80C to ₹2.5 lakh, it will benefit a large number of people. Many taxpayers still use the old income tax regime. Experts say that Section 80C has played a significant role in increasing family savings. To take advantage of the deduction, middle-class taxpayers, in particular, invest in PPF and ELSS for the long term. This helps them build a substantial retirement corpus.
The government has not provided relief to taxpayers under the old regime.
Finance Minister Nirmala Sitharaman announced a new income tax regime in the 2020 Union Budget. Taxpayers showed little interest in the new regime in the initial years. The government then made several major announcements to make it attractive. The standard deduction was increased to ₹75,000 and it was announced that it would be made the default regime. Last year’s budget made income up to ₹12 lakh per annum tax-free under the new regime. However, the government has not provided any relief to taxpayers under the old regime in the past several years.
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