The salaried class might be in luck this year as Finance Minister Nirmala Sitharaman is likely to increase Section 80C limit to Rs 2 lakh. Section 80C was last enhanced by former Finance Minister Arun Jaitley in 2014 when he increased it from Rs 1 lakh to Rs 1.5 lakh. Increasing Section 80C limit is part of multiple wishlists this year.
A source in the Income Tax Department told BusinessToday.In that discussions to alter exemptions limits have taken place. The source said that changes to the exemption limits in the personal income tax have been discussed. Tax exemption limit of Rs 1.5 lakh on savings is likely to be reworked. It may go up to Rs 2 lakh, the source said. However, there might be no room to provide further exemptions to the common taxpayer.
Multiple associations and experts have opined that the Section 80C limit must be increased. However, most have suggested almost doubling the limit. FICCI is one of the organisations to recommend increasing the limit. It said that the Union Budget should look at doubling the Section 80C limit from Rs 1.5 lakh to Rs 3 lakh. It said that the Centre should start more tax-exempt investment avenues like life insurance and pensions. It said that the government might consider separate exemption limits as it would 'mobilise funds for infrastructural and overall economic development'.
Meanwhile, the Institute of Chartered Accountants of India (ICAI) has also suggested increasing Section 80C limit to Rs 2.5 lakh. "The quantum of deduction under section 80C to be increased from Rs 1,50,000 to Rs 2,50,000 to provide savings opportunities to the public at large," ICAI said. The ICAI has also recommended increasing PPF limit from Rs 1.5 lakh to Rs 3 lakh.
Enhancement of the limit is believed to boost further investment and increase tax savings for an individual.
WHAT IS SECTION 80C?
As per the Section 80C, one can claim deduction of Rs 1.5 lakh on the total income. In other words, individual taxpayers can reduce up to Rs 1.5 lakh from the total taxable income amount. Life insurance premium, public provident fund, employees provident fund, equity-linked saving schemes, home loan principal amount, stamp duty and registration charges for property purchase, Sukanya Samriddhi Yojana, National Saving Certificate, senior citizen savings scheme, ULIPs, tax saving FD for 5 years, infrastructure bonds are some of investments under which a taxpayer can avail the exemption. If you have paid excess taxes but invested in LIC, PPF, etc you can claim while filing income tax return and the amount will be refunded.
Also read: Budget 2021: India Inc's wishlist