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With the Budget 2026 date of February 1 just a few days away, some salaried taxpayers are at crossroads- whether to stick to the old tax regime packed with deductions or to move to the new regime that offers a higher tax-free income limit. Because of a higher tax-free income limit, most taxpayers have already shifted to the new tax regime. But those paying home loan equated monthly instalments (EMIs), insurance premiums, rent or investing in long-term small savings schemes, are still in confusion whether they should continue with the old tax regime or shift to the new.
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For such taxpayers, expectations from Budget 2026 will not be just about revised income tax slabs, but they will also want increased deduction limits.
Let’s see what are the key deductions that the old and new tax regimes offer and what are experts’ expectations related to these deductions from Budget 2026.
What are the key deductions in the old and new tax regimes?
Key deductions in the old tax regime
Abhishek Soni, CEO and founder, Tax2Win, explains-
Under the old tax regime, you get many deductions and exemptions that reduce your taxable income. Common ones include:
● Section 80C (up to Rs 1.5 lakh for investments like PPF, EPF, ELSS, LIC)
● Section 80D (health insurance premium)
● House Rent Allowance (HRA) and Leave Travel Allowance (LTA)
● Interest on home loan for self-occupied property
● Standard deduction of about Rs 50,000 for salaried people
These help especially if you invest a lot or have expenses like rent or home loan interest.
New Tax Regime (Section 115BAC):
Soni says the new regime has lower tax rates and a higher standard deduction (around Rs 75,000), but most old deductions are not allowed. Allowed benefits are limited — for example:
● Standard deduction (higher than old regime)
● Employer’s contribution to NPS
● Some exemptions like gratuity and voluntary retirement pay
● Few others like Agniveer corpus fund deduction in certain cases
Most popular deductions like Section 80C, 80D, HRA, LTA are not available here.
Sanjay Kumar, director, Nangia Global, says, “The old tax regime offers a wide range of deductions such as those under Sections 80C, 80D and interest on housing loans, encouraging savings, insurance and home ownership. While the new regime is gradually gaining acceptance, taxpayers often struggle to choose between the two due to changing personal circumstances.”
What experts want related to deductions from govt in Budget 2026
Kumar says a key expectation is a calibrated approach that balances simplicity with meaningful incentives for long-term savings and social security.
“Allowing select deductions such as for provident fund contributions, health insurance and housing loans under the new regime would enhance its attractiveness without compromising simplicity. Greater certainty and fewer structural changes would also help taxpayers make informed, long-term tax planning decisions,” says Kumar.
Soni says many taxpayers expect that the government may simplify the deduction structure further so it is easier to choose between regimes.
“Some hope the new regime might allow more basic deductions (like health insurance or home loan interest), so it is not just about slab rates, but also real relief for people with expenses. Others would like to see higher limits for old regime deductions, so they stay useful for savings and investment planning. Clearer rules and less complicated paperwork are also expected so that filing taxes becomes simpler for everyone,” says Soni.
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