The announcement of the budget for financial year 2018-19 is not far away and people have high expectations from it. In a move to channelise more income towards financial instruments, the Central government plans to raise the investment limit under Section 80C to Rs 2 lakh against the current Rs. 1.5 lakh.
Finance Minister Arun Jaitley may raise tax breaks offered for the savings in products including provident fund, national savings certificates (NSC), insurance premium, bank fixed deposits and specific mutual funds under Section 80C, according to a Moneycontrol report.
This could be part of policies to motivate people to save more money in financial instruments and avoid locking up surplus funds in physical assets like gold.
The current rules allow people to claim tax deductions of up to Rs 1.5 lakh under Section 80C of the Income Tax Act for savings in products such as provident fund, national savings certificates (NSC), five-year fixed deposits, children's tuition fee, public provident fund, some mutual funds, repayment of principal amount of home loans and life insurance premium.
For instance, if your annual income is Rs 20 lakh and you invest in the financial instruments mentioned under Section 80C, your income for tax computation will become Rs 18 lakh if there is a hike in the ceiling.
The deduction limit under Section 80C has been at the current Rs 1.5 lakh since FY2014-15. Arun Jaitley had raised the exemption limit under Section 80C from Rs 50,000 to Rs 1.5 lakh when he presented his first budget that year.