The Union Budget 2026 is generating significant anticipation as India navigates challenging global economic conditions. According to Sonal Badhan, Economist at Bank of Baroda, the government is likely to set ambitious yet realistic targets while maintaining fiscal discipline across key economic parameters.

Growth Projections and Capital Investment Strategy

The budget is expected to project robust economic growth alongside substantial infrastructure investment. Key fiscal targets demonstrate the government's commitment to balanced growth and financial prudence.

The government has demonstrated strong execution capabilities, achieving approximately 60.00% of its budgeted capital expenditure target by November 2025. This performance provides confidence in the ambitious capex projections for the upcoming fiscal year.

Tax Policy: Stability Over Changes

Major revisions in direct or indirect taxes are unlikely this year. The previous year's budget and GST 2.0 rationalization have already addressed most tax-related concerns, shifting focus from tax cuts to strategic sectoral support initiatives.

The approach emphasizes maintaining current tax structures while directing resources toward targeted industry support and growth-enabling measures.

MSME and Export Sector Support

Given global economic uncertainties, the budget prioritizes support for Micro, Small, and Medium Enterprises alongside export-oriented sectors. Key support measures include:

• Interest Subvention Scheme: Financial relief for MSMEs and exporters
• Customs Duty Rationalization: Further reduction in duty slabs beyond last year's consolidation to eight categories
• Raw Material Support: Additional duty reductions to lower average customs duty rates
• Trade Agreements: Potential Free Trade Agreements to maintain export momentum

These measures aim to strengthen India's export competitiveness despite challenging global headwinds.

Innovation and Research Development Focus

A significant development could be the introduction of a dedicated Research and Development PLI scheme. Currently, R&D support is embedded within individual industry schemes, but a standalone program could attract innovation across multiple sectors.

The government may expand PLI coverage to include emerging technology sectors, positioning India as a global innovation hub while boosting domestic manufacturing capabilities.

Monetary Policy and Investment Climate

The Reserve Bank of India is expected to implement supportive monetary measures, including a potential 25 basis points policy rate cut in its final FY26 policy. The central bank's GDP forecast of 7.30% aligns closely with the first advance estimate of 7.40%.

Private investment, which has been selective recently, shows signs of revival. The government's Production Linked Incentive scheme may undergo modifications to sustain this positive momentum and encourage broader private sector participation.

Asset monetization is expected to play a larger role than disinvestment in government revenues, continuing the trend that began in FY26. This approach provides sustainable funding for development initiatives while maintaining government assets.

The Union Budget 2026 aims to balance growth ambitions with fiscal responsibility through higher capital spending, stable tax policies, and targeted sectoral support. The combination of MSME assistance, export incentives, innovation-focused PLI schemes, and accommodative monetary policy positions India to navigate global uncertainties while strengthening long-term economic competitiveness.

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.