Budget 2026: Higher Deductions Likely for Senior Citizens, Major Tax Rate Changes Unlikely, Says Deloitte Executive

As India prepares for the Union Budget 2026–27, expectations are rising that senior citizens could emerge as one of the key beneficiaries, even as the government is unlikely to announce sweeping changes to personal income tax rates. According to Tarun Garg, Executive Director at Deloitte India, the upcoming budget may focus more on fine-tuning the new tax regime, offering targeted relief and improving administrative simplicity rather than introducing broad structural reforms.

The Union Budget for FY 2026–27 is scheduled to be presented in Parliament on February 1, 2026.

Senior Citizens May Get Additional Tax Relief

Speaking to news agency ANI, Garg said the government appears keen to provide additional relief to senior citizens, particularly in light of rising healthcare costs and increasing living expenses.

From a personal taxation perspective, Garg noted that medical inflation has significantly increased the financial burden on older individuals. Many senior citizens are now spending a larger share of their income on healthcare and insurance, which strengthens the case for enhanced tax deductions.

“Medical costs are going up, and senior citizens are required to allocate more of their savings toward health and healthcare needs. This creates room for the government to consider additional deductions for them,” Garg said.

Higher Deduction on Interest Income Could Be Considered

Another area where relief is being widely discussed is interest income from bank deposits and small savings schemes. Garg highlighted that there is growing demand to increase deductions on interest earned from such instruments, especially for retirees who rely heavily on fixed-income investments.

According to him, enhanced deductions on interest income could help senior citizens cope better with inflation and the rising cost of living, particularly at a time when real returns on traditional savings instruments remain under pressure.

Current Tax Provisions on Interest Income Explained

Under the existing income tax framework:

• Section 80TTA allows individuals below the age of 60 and Hindu Undivided Families (HUFs) to claim a deduction of up to ₹10,000 per year on interest earned from savings accounts held with banks, cooperative societies, or post offices.

  • This benefit does not apply to interest earned from fixed deposits (FDs), recurring deposits (RDs), or corporate bonds.

• Section 80TTB, applicable to senior citizens aged 60 years and above, provides a much broader benefit.

  • Under this provision, senior citizens can claim a deduction of up to ₹50,000 per financial year on interest income earned from savings accounts, fixed deposits, term deposits, post office schemes, and cooperative bank deposits.

Market experts believe Budget 2026 could further enhance these limits to provide meaningful relief to elderly taxpayers.

Focus Likely to Be on Improving the New Tax Regime

According to ANI’s report, Garg also indicated that the government is unlikely to announce dramatic tax overhauls in Budget 2026. Instead, the emphasis may be on strengthening and refining the new tax regime, which has gradually become the default option for many taxpayers.

One possible targeted change could involve provident fund contributions. Garg suggested that the government may consider allowing employer-driven provident fund deductions under the new tax regime—an adjustment that could make the system more attractive for salaried individuals.

Standard Deduction May See a Modest Increase

The standard deduction is another area where limited relief could be introduced. Garg said the government may consider increasing the standard deduction limit under the new tax regime to ₹25,000 or possibly higher, providing incremental relief to taxpayers without complicating the structure.

Tax Slab Rates Likely to Remain Unchanged

On the issue of tax rates, Garg advised caution. He does not expect any major changes to income tax slab rates under the new tax regime.

“From a rate perspective, I don’t see much happening. Slab rates under the new tax system are unlikely to change,” he said.

However, there may be some adjustments related to surcharge, as the government looks for ways to ease inflationary pressure on taxpayers without disrupting revenue stability.

Targeted Relief Over Big Reforms

Overall, the message from Deloitte’s executive leadership is clear: Budget 2026 is expected to prioritize targeted relief, simplicity, and administrative efficiency, rather than headline-grabbing tax reforms.

For individual taxpayers—especially senior citizens—the focus is likely to be on incremental benefits such as higher deductions, better treatment of interest income, and modest enhancements to standard deductions. These measures, while not dramatic, could collectively improve post-tax income and financial stability for millions of Indians.

As always, taxpayers are advised to assess budget announcements carefully and consult certified tax professionals before making financial decisions.