Industry experts are calling for significant tax relief for senior citizens in Budget 2026, emphasizing that current exemption limits have failed to keep pace with rising living costs and healthcare expenses. With India's 14 crore-plus senior citizens facing mounting financial pressures from medical inflation, static tax thresholds, and shrinking social security support, experts argue that targeted reforms are both practical and overdue.

Current Tax Structure Remains Static Since 2014

The basic exemption limit for senior citizens currently stands at ₹3.00 lakh, while very senior citizens aged 80 years and above enjoy a ₹5.00 lakh exemption threshold. These limits have remained unchanged since their last revision, creating a significant gap between tax policy and economic reality.

Vijay Bharech, Partner at Deloitte India, emphasizes the urgency of reform: "These provisions have remained static for years despite rising living costs. A revision in exemption limits would offer meaningful relief to retirees who rely largely on passive income and help reduce compliance burdens."

Medical Inflation Outpaces General Price Rise

Medical inflation in India is estimated at 12-14% annually, significantly higher than overall inflation, creating particular hardship for senior citizens who face the highest healthcare burden. This disparity has made existing tax structures increasingly inadequate for retirees managing fixed incomes and rising expenses.

Narendra Bharindwal, President of the Insurance Brokers Association of India, notes: "A calibrated increase in exemption limits is overdue, particularly for retirees dependent on fixed incomes and savings, and can be implemented without materially impacting the overall tax base."

Recommendations for Interest Income Relief

Experts are advocating for substantial increases in Section 80TTB limits, which currently allow senior citizens to claim deductions of up to ₹50,000 on interest income from savings accounts, fixed deposits, and recurring deposits. The proposed reforms address the reality that interest income remains a lifeline for retirees.

Kirang Gandhi, a Pune-based financial mentor, explains: "Interest income continues to be a lifeline for retirees, yet the rules around TDS and deductions remain outdated. Increasing the Section 80TTB limit to ₹75,000 or even ₹1.00 lakh would help prevent avoidable tax deductions that disrupt monthly cash flows for senior citizens."

Healthcare Deduction Updates Sought

With medical inflation running well ahead of general inflation, experts are pushing for enhanced Section 80D deduction limits specifically for senior citizens. The current structure fails to address the reality of healthcare costs that disproportionately impact older citizens.

Bahroze Kamdin, Partner at Deloitte India, advocates for regime-neutral benefits: "Health insurance premiums, including those paid for senior citizens, should be eligible for deductions regardless of the regime chosen. Extending similar benefits in India could improve insurance adoption while offering direct relief to retirees."

New vs. Old Tax Regime Considerations

The disparity between tax regimes creates additional complexity for senior citizens. While the new tax regime offers a universal ₹4.00 lakh exemption, it lacks age-based considerations and medical-related deductions that are crucial for retirees.

Experts suggest that if the government continues encouraging adoption of the new tax regime, senior citizens should retain access to essential medical-related tax benefits. Bharindwal proposes: "A simpler approach would be to introduce limited, senior-specific deductions within the new regime, particularly for health insurance or critical illness covers, without complicating the tax structure."

The consensus among financial experts is clear: Budget 2026 presents a critical opportunity to address long-pending gaps in senior citizen tax policy, ensuring that India's growing retiree population can maintain financial dignity amid rising costs and economic pressures.

Veteran investors believe the upcoming Union Budget is unlikely to deliver significant tax relief, as the government has already undertaken substantial tax reforms and is now focused on reviving economic growth through alternative measures.

Investors' Budget Outlook

Speaking at a CNBC-TV18 event in Mumbai on January 13, prominent investors shared their expectations for Budget 2026. Raamdeo Agrawal, Chairman and Co-founder of Motilal Oswal Financial Services, and Manish Chokhani, Director at Enam Holdings, both emphasised that the scope for further tax cuts appears limited given recent policy changes.

"There is no question of raising the tax rate, because otherwise they would not have brought down the GST from 28 percent to 18 percent. It's quite a budget in itself," Agrawal said, adding that the government has already "opened the hands".

Tax Reform Assessment

The investors highlighted the extensive tax reforms already implemented by the government. Key changes include substantial reductions in both direct and indirect taxes, creating limited room for additional relief measures.

Chokhani reinforced this view, stating: "They have already cut your direct taxes. They have already cut your indirect taxes. So, there is nothing to look forward to on that side."

Focus on Credit Revival and Growth

Agrawal emphasised that reviving credit growth remains critical for economic recovery. He noted that credit flow had been curtailed earlier, possibly to control inflation, but now needs restoration to drive growth.

"They've got to get it back to 40 to 50 percent credit flow. That will give you 11 to 12 percent nominal growth and then it's all evergreen," Agrawal explained. He stressed that raising taxes would not help if economic growth remains weak, stating: "If the economy is not growing, any kind of tax rate is nominal."

Asset Monetisation Strategy

Chokhani suggested that the next phase of resource mobilisation may come from public sector asset sales. He drew parallels to the privatisation drive during the Vajpayee era from 2000-03, which helped revive business sentiment.

"The resource-raising exercise must come now from the public sector. If some of those assets go cheap through private hands, like it started in 2000–03 in the Vajpayee era, it re-ignites animal spirits," Chokhani said.

Private Sector Challenges

Both investors acknowledged current challenges facing private sector investment. Chokhani noted that companies remain cautious amid global uncertainty: "The private sector is clearly not opening the purse strings. They are very uncertain about what's happening in the world right now."

Additional cost pressures from recent labour reforms have also impacted corporate expenses. "Even the labour codes which have come have increased the accounting costs for companies. So, you need to give a profit fillip to the private sector," Chokhani observed.

Capital Gains Perspective

On capital gains taxation, Chokhani termed it a "red herring" that creates unnecessary friction, particularly for foreign investors. He emphasised that returns matter more than marginal tax changes: "I'd rather make a 25 percent gain and pay a 12.5 percent tax than make a 12 percent gain and pay a 10 percent tax."

The investors concluded that markets ultimately depend on business growth rather than tax adjustments, with the real focus needing to be on reviving entrepreneurial confidence and economic momentum.