Loan relief expectations from Union Budget 2026 for home, education and personal loans

As India heads into Union Budget 2026, borrowers across segments are closely tracking potential policy measures that could ease their repayment burden. As household borrowing is steadily rising, expectations around loan relief, debt relief, and tax support have become a major part of the pre-Budget conversation. Homebuyers, students, and individuals relying on personal loans are also looking for signals that could improve affordability and financial flexibility in the coming year.

Loan Relief: Why It Matters in Budget 2026

EMIs are taking a larger share of monthly incomes for both salaried and self-employed borrowers. So, Union Budget 2026 is being viewed as an opportunity to offer targeted loan relief via tax deductions and credit support schemes.​

Key drivers behind loan relief demands:

• High home loan EMIs due to an increase in property rates.​
• Growing education and overseas study costs, pushing families to rely heavily on education loans.​
• Rising share of personal and other unsecured loans in retail credit, raising concerns about repayment burden and household cash flows.​

Understanding Loan Relief and Debt Relief in Union Budget 2026 Context

In the Union Budget context, ‘loan relief’ generally means tax and policy measures that reduce effective borrowing costs, not blanket loan waivers. These can include higher deduction limits on interest, interest subsidies, credit guarantee schemes, and targeted support to specific borrower groups like affordable homebuyers or students. 

Common channels the Budget uses for relief:

• Income tax deductions on loan interest/principal (Sections 24(b), 80C, 80E etc.).​
• Credit guarantee schemes for priority segments such as affordable housing, MSMEs, or education loans.​
• Regulatory or policy changes for easier restructuring, longer tenors, or lower risk weights to keep EMIs manageable without destabilising lenders.​

Home Loan Expectations from Union Budget 2026

One of the most discussed expectations ahead of Budget 2026 is a possible revision in the home loan interest deduction limit. Currently, deductions on interest paid for self-occupied properties are capped, and many homebuyers feel this limit no longer reflects present-day property prices or loan sizes.

There is growing anticipation that the government may review or rationalise home loan interest deductions to improve affordability, especially for first-time buyers and middle-income households.

Home Loan Interest Deduction Expectations

Under Section 24(b), individuals using the old regime can currently claim up to ₹2 lakh deduction on interest paid for self-occupied housing loans. Industry representations for Budget 2026 commonly ask that this limit be raised substantially to better reflect actual annual interest outgo on typical urban home loans.​

Pre-budget asks from real estate consultants and housing advocates were to increase the Section 24(b) interest cap from ₹2 lakh to ₹3-₹4 lakh, as suggested by some tax and investment advisory pieces.​

Impact of Budget 2026 on Housing Demand and Affordability

Meaningful hike in home loan interest deduction limits could lower tax for borrowers and partly reduce higher EMI burdens, especially in metros and Tier-1 cities. This can support housing demand in mid-income and affordable segments.​

Any positive move on home loan tax relief is expected to have a direct impact on housing demand. Lower effective borrowing costs can encourage fence-sitters to enter the market and improve affordability. As housing remains closely linked to employment and allied industries, Budget-led support for home loans could also have broader economic implications.

Tax Relief Measures for Homebuyers

Beyond interest deductions, homebuyers are also looking for:

• Widening principal repayment benefits under Section 80C for home loan EMI principal, within or alongside the existing ₹1.5 lakh limit.​
• Additional incentives for first-time homebuyers
• Alignment of housing-related tax benefits with current market realities

Such measures could provide meaningful relief and improve homeownership sentiment, particularly in urban and semi-urban markets.

Education Loan Expectations from Union Budget 2026

Education loans are increasingly used to fund higher studies in India and overseas, and the tax treatment of interest plays a big role in planning. With tuition and related expenses rising sharply, stakeholders are keen that Budget 2026 protects or improves key tax benefits and support structures.​

Budget on Education Loan and Tax Benefits

Section 80E currently allows a deduction for the entire interest portion of an education loan EMI, with no upper monetary cap on the amount claimed. However, this benefit is limited to a maximum of eight consecutive years from the start of interest repayment. It is available only under the old tax regime in FY 2025‑26, so switching to the new regime means losing this deduction.​

Education Loan & Interest Relief Expectations

There is an expectation that the government may revisit education loan interest relief provisions, especially for borrowers in the early years of their careers. Extended benefit periods or clearer guidelines on claiming deductions could help reduce the financial burden during the repayment phase. 

• To retain Section 80E in its current form under the old regime, given its importance for middle-class families funding higher education.​
• Suggestions from tax planners that, if the new regime increasingly becomes the default, some form of limited education loan relief (even if with a cap) should be considered there too.​

• In India and overseas, borrowers of education loans are hopeful that Budget 2026 could strengthen existing tax provisions or simplify access to education loan benefits.

• Allowing partial deduction or staggered relief for borrowers who refinance or restructure their education loans, if the end use remains education.​

Support for Higher Education and Overseas Study Loans

Policymakers are also evaluating broader support for higher education financing, including for students studying abroad. Banks and NBFCs have highlighted the need for risk-sharing mechanisms and guarantees for certain categories of education loans to avoid excessive collateral demands.​

With a growing number of students opting for overseas education, education loan expectations also include:

Potential policy support themes:

• Expanded or more flexible government-backed guarantee schemes for meritorious students, especially from lower-income backgrounds to access loans without heavy collateral.​
• Possible interest subvention or partial subsidy for specific professional courses.
• Policy clarity for foreign education loans
• Measures to reduce repayment pressure during currency volatility
• Easier access to structured education financing

Such steps could support India’s expanding global student base while keeping education financing sustainable.

Personal Loan Relief Expectations from Union Budget 2026

Unlike home and education loans, personal loans and other unsecured borrowings generally do not enjoy direct income tax deductions on interest for individual consumption purposes. However, the rapid growth of unsecured retail loans and concerns over household leverage have pushed calls for more indirect relief and stronger consumer protection.​

Personal loans are typically unsecured and carry higher interest rates. While direct tax benefits on personal loans are uncommon, borrowers are hopeful for indirect relief measures that improve repayment flexibility or reduce overall debt stress.

Policy Support for Unsecured Loan Borrowers

Expectations also extend to regulatory or policy measures that promote responsible lending and borrower protection. Improved transparency, better credit assessment norms, and borrower-friendly repayment frameworks are often seen as long-term relief mechanisms for unsecured loan users.

Debt relief for personal loans tends to come through systemic or welfare-driven interventions, not routine Budget tax proposals. Still, certain themes are visible in pre-budget commentary around retail credit quality and borrower stress.​

Regulators are worried because unsecured personal loans are growing very fast. Instead of giving tax benefits, policies are more likely to focus on safer lending rules and better protection for borrowers. It can avoid future loan problems rather than cutting interest costs on shopping or consumption loans.

Key expectations or discussion points:

• Stronger frameworks for restructuring and one‑time settlements in genuine hardship cases, especially where borrowers face job loss or medical emergencies.
• Encouragement for financial literacy campaigns and responsible lending norms, to reduce over-borrowing and help borrowers manage debt better across multiple loan products.​

Possible indirect channels of EMI relief:

• A credible fiscal consolidation path that supports lower medium-term bond yields and, in turn, reduces funding costs for lenders.​
• Targeted schemes or refinance lines to bring down effective cost of borrowing for specific segments like MSMEs or low-income households.​
• Policies could ask lenders to clearly show the full cost of a loan, including all fees and charges, so that borrowers can easily compare options and pick more carefully.​
• Financiers may also work with the RBI to set safer rules for unsecured loans, so that personal loan growth stays healthy and people will get easy access to short-term credit.

Expectations for Union Budget 2026 are centred on strengthening existing loan-linked deductions rather than announcing outright waivers or blanket EMI subsidies. Home loans remain the most likely segment to see any tax-side relief. Education loans are expected to at least retain current benefits. Whereas personal loans are more dependent on macro and regulatory support than direct tax breaks.​