Budget 2026: Increase Section 80C deduction limit to ₹3.5 lakh, industry body suggests

In one such interesting suggestion, the American Chambers of Commerce in India (AMCHAM) has suggested increasing the Section 80C deduction limit to ₹3.5 lakh from ₹1.5 lakh.

Currently, Section 80C of the Income Tax Act, 1961 allows taxpayers to claim a deduction of up to ₹1.5 lakh against certain tax-saving investments. However, this benefit is available only to those taxpayers who have opted for the old tax regime. The new tax regime doesn't allow deductions under Section 80C.

According to AMCHAM, increasing the section 80C limit will help increase tax savings for individuals and HUFs.

"Currently, overall deduction u/s 80C of ITA 1961 (Section 123 of ITA 2025) is ₹150,000/-. This is to be increased to ₹350,000," AMCHAM said in its Pre-Budget Memorandum 2026-27.

The demand for increasing the Section 80C deduction limit is not new. In past, various industry bodies and tax experts suggested the government to increase the Section 80C threshold to ₹3 lakh.

Finance Minister Nirmala Sitharaman will present Budget Speech 2026 on February 1, 2026.

Established in 1992, AMCHAM has over 400 U.S. companies as members and plays a key role in fostering strong ties between the U.S. and India. The incumbent U.S. Ambassador to India is the Honorary President of AMCHAM.

The industry body has also suggested increasing the deduction limit in respect of life insurance premium, from the current ₹1.5 lakh to at least ₹2.5 lakh under Section 80C of the Old Tax Regime. Please note this deduction is not available under the new regime.