Budget 2026 expectations: NPS tax benefits, ageing India and pensions

With India's senior population rising, industry executives want wider NPS tax benefits and simpler pension rules in Budget 2026

With Budget 2026 approaching, expectations are building around possible tax relief for senior citizens and wider incentives for retirement planning. One area drawing attention is the National Pension System, which already offers tax deductions under Section 80CCD under both the old and new tax regimes. There are also calls for a more comprehensive framework to support ageing Indians, including in-home care options.

 

Industry executives say demographic shifts are making pension planning harder to ignore.

 

India’s ageing population and retirement pressure

 

India’s population is ageing faster than many households are prepared for. More than 140 million Indians are now above the age of 60, making up about 10 per cent of the population.

 

“India’s demographic transition is no longer a future concern. Today, over 140 million Indians are above the age of 60, accounting for approximately 10 per cent of the population. By 2047, this cohort is expected to nearly double, with close to one in five Indians likely to be over 60,” said Vishwajeet Goel, head of Pensionbazaar, the retirement planning arm of PB Fintech.

 

Goel said longer life expectancy and changing family structures are reshaping how people fund their post-retirement years.

 

“This sharp rise in longevity will fundamentally alter how households fund their post-retirement lives, especially at a time when traditional family support structures are weakening,” he said.

 

 

Push to widen NPS tax benefits

 

Against this backdrop, executives are pressing for changes to the National Pension System to make it more attractive, especially under the new tax regime.

 

“Extending tax benefits on NPS contributions under the new tax regime to both salaried and self-employed individuals will help encourage long-term, disciplined retirement savings,” Goel said.

 

He said broader access to tax deductions could improve pension participation at a time when personal savings are under strain.

 

“As the country ages, making pension planning more rewarding and predictable becomes essential for ensuring financial independence in later years,” Goel said.

 

Calls to delink employer role from tax benefits

 

Another proposal gaining ground is to change how employer participation affects tax benefits under NPS.

 

PB Fintech joint group CEO Sarbvir Singh said retirement preparedness is becoming a core part of India’s financial system.

 

“There is an urgent need for sustained, long-term pension savings and retirement preparedness is emerging as a critical pillar of India’s financial ecosystem,” Singh said.

 

He said Budget 2026 could help by widening eligibility and removing structural barriers.

 

“The Budget 2026 can encourage disciplined retirement savings by extending NPS tax benefits to both salaried and self-employed individuals. Also, delinking employer participation from the employee’s tax benefit will allow voluntary contributions up to the defined threshold,” Singh said.

 

How delinking could work in practice

 

Goel said many corporate employees are unable to fully use existing tax incentives because employer contributions are tied to employee eligibility.

 

“Another opportunity area lies in improving the utilisation of an already available tax incentive for individuals employed in the corporate sector by delinking employer participation from the employee’s tax benefit,” he said.

 

This could allow:

 

< Employees to claim tax benefits on voluntary NPS contributions up to the existing threshold

< Continuity of pension savings even when switching jobs

< Wider participation from the formal workforce

 

“Greater flexibility can help bring more of the formal workforce into the pension net and support continuity of savings across careers,” Goel said.

 

Singh said predictable and flexible pension rules are becoming increasingly important as retirement spans grow longer.

 

“Making pension planning more rewarding, flexible and predictable will be essential to ensuring financial independence in later years and aligning India’s pension framework with global best practices,” Singh said.