In the Union Budget 2026, Finance Minister Nirmala Sitharaman prioritized simplifying compliance and making tax filing more convenient, rather than introducing major changes to the tax slabs.
For the Financial Year 2026-27 (Assessment Year 2027-28), the tax-free income limit for senior citizens largely depends on their choice between the New Tax Regime and the Old Tax Regime.
New Tax Regime (Default Option)
The New Tax Regime offers lower tax rates and simplified compliance, though with limited deductions. As per the Income Tax Act, 2025 (effective from April 1, 2026), the tax-free threshold has been made significantly more attractive.
- Effective Tax-Free Income: Up to Rs 12.75 lakh.
- Standard Deduction: Raised to Rs 75,000 for salaried employees and pensioners.
- Tax Rebate (u/s 87A): Increased to Rs 60,000, which fully offsets tax liability for individuals with total taxable income up to Rs 12 lakh.
It's important to note that under the New Tax Regime, senior citizens do not receive a separate higher basic exemption limit; the Rs 4 lakh exemption applies uniformly to all taxpayers.
Old Tax Regime
The Old Tax Regime may still be preferable for those with substantial investments in instruments like LIC, PPF, or high medical insurance premiums, as it allows for various deductions. It continues to offer age based basic exemption limits.
| Category | Age Group | Basic Exemption Limit |
| Senior Citizen | 60 to 79 years | Rs 3,00,000 |
| Super Senior Citizen | 80+ years | Rs 5,00,000 |
Additional Deductions (Exclusive to Old Regime)
Under the Old Tax Regime, senior citizens can significantly increase their tax-free income by availing the following targeted deductions:
- Section 80TTB: Offers a deduction of up to Rs 50,000 on interest income earned from banks or post offices.
- Section 80D: Provides a deduction of up to Rs 50,000 for health insurance premiums paid or medical expenses incurred.
- Section 80C: Allows a deduction of up to Rs 1.5 lakh for qualifying investments such as PPF, ELSS, and similar instruments.
Key Budget 2026 Reforms: 'Quality of Life' Measures
Although tax slabs remained unchanged, the Budget introduced two significant relief measures aimed at simplifying financial compliance for senior citizens:
One-Time Form 15H Submission
Effective April 1, 2026, senior citizens will no longer have to submit Form 15H separately to each bank. A single submission through the NSDL or CDSL portal will automatically apply to all linked bank accounts and fixed deposits, helping prevent unwanted TDS deductions.
Automatic Issuance of TDS Certificates
For individuals whose income falls below the taxable threshold, "Nil" or lower TDS certificates will now be generated automatically based on their past Income Tax Returns (ITR) filings, eliminating the need for manual applications.
Summary Table: New vs. Old (FY 2026-27)
| Feature | New Regime (Default) | Old Regime (Optional) |
| Effective Tax-Free Limit | Rs 12.75 Lakh (Salaried/Pension) | Rs 5 Lakh (after Rebate) |
| Standard Deduction | Rs 75,000 | Rs 50,000 |
| 80C (LIC/PPF) | Not Available | Up to Rs 1.5 Lakh |
| 80TTB (FD Interest) | Not Available | Up to Rs 50,000 |
| Medical (80D) | Not Available | Up to Rs 50,000 |
FAQs
What is the maximum income I can earn without paying any tax?
- New Tax Regime: You can earn up to Rs 12.75 lakh tax-free. This includes the basic Rs 12 lakh limit (thanks to the Rs 60,000 rebate u/s 87A) plus the Rs 75,000 Standard Deduction.
- Old Tax Regime: You can earn up to Rs 5 lakh tax-free (via the Rs 12,500 rebate). However, you can push this much higher by using deductions like 80C, 80D, and 80TTB.
Did the age-based exemption change in Budget 2026?
No. The basic exemption limits for the Old Tax Regime remain:
- 60–79 years: Rs 3,00,000
- 80+ years: Rs 5,00,000 In the New Tax Regime, there is no age-based distinction; a flat Rs 4,00,000 basic exemption applies to everyone.
How much interest income is tax-free for me?
Under Section 80TTB (Old Regime), senior citizens can claim a deduction of up to Rs 50,000 on interest from savings accounts, FDs, and post office schemes.
Note: This deduction is not available in the New Tax Regime. However, the higher TDS threshold of Rs 1 lakh (increased in the previous cycle) continues to prevent tax from being deducted at the source if your interest is below this amount.
What is the new "One-Time Form 15H" rule?
Previously, you had to submit Form 15H to every bank where you held an FD. From April 1, 2026 , you can file a single declaration through the central NSDL/CDSL portal. This one-time filing will automatically link to all your banks via PAN, preventing multiple TDS deductions.
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