Budget 2022: Tax experts say that the limit of section 80C should be increased in different tax-saving investments and expenses.
Budget 2022: Individual taxpayers get exemption on various types of expenses and investments under Section 80C of the Income Tax Act 1961. Under the Income Tax Act, the benefit of tax exemption can be taken on expenditure and investment up to Rs 1.5 lakh. Under section 80C, the benefit of deduction is available on PPF, EPF, LIC premium, ELSS, children’s fees, principal amount payment of home loan, stamp duty and registration charges for purchase of property, etc. However, tax experts say that the section 80C limit should be increased for different tax-saving investments and expenses. Taxpayers have also been demanding for a long time to increase the limit of section 80C. Keeping in mind the current economic situation, one of the priorities of the government is to stimulate demand and this can be done by increasing the limit of 80C in the upcoming budget.
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How will taxpayers benefit from the increase in 80C limit?
- At present, there are 25 different investment and expenditure exemptions under Section 80C of the Income Tax Act, including Provident Fund, PPF, NSC, Children’s Tuition Fee, Housing Loan Principal Repayment, Tax Saving Mutual Funds, 5 Years Term Includes deposits, life insurance payments. A taxpayer who chooses to invest in PPF of Rs 1,50,000 is eligible to claim for tuition fees of children, housing loan principal repayment or additional investments made in tax saving mutual funds, NSC, etc. Not there. Any increase or decrease in the limit of section 80C has a direct bearing on the taxable income and on the tax liability of an individual.
- Sudhakar Sethuraman, Partner, Deloitte India, says, “The real estate market is witnessing a jump in investment due to the lowest ever housing loan rates. At present, the housing loan principal repayment is also included in the limit of Rs 150,000. Since housing is an essential part of an individual’s life, a separate deduction is required for housing loan principal repayment. With this, taxpayers will get the benefit of higher deduction in repayment of housing loan. Along with this, additional savings will be allowed through other investment categories.
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- Salaried taxpayers invest in Provident Fund or National Pension Scheme and due to this, the limit of 1.5 lakh under 80C is partially or completely eliminated. Therefore, the increase in the limit will help the salaried taxpayers to invest in small savings schemes and other avenues.
- Due to the epidemic, people’s expenditure has increased. Sethuraman explains, “It is high time that the government should increase the limit of 80C deduction. This will help common taxpayers to reduce taxes and save on additional expenses.”
- The last time the limit under section 80C was increased from Rs 1,00,000 to Rs 1,50,000 in the Union Budget of 2014-15. Since then, the rate of inflation has increased. Apart from this, the interest rates on savings bank accounts or fixed term deposits are also at a lower level. Hence, it is necessary to increase the 80C limit so that taxpayers can save more by investing in multiple schemes.
- However, it should also be noted that a taxpayer who opts for the new tax regime is not eligible to claim deduction under section 80C.
(Article: Sanjeev Sinha)
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