With the intent to incentivise the lower and middle class that have faced the most hardship during COVID, the government is expected to relook at the deductions that are currently available, and that have remained unchanged for several years. Experts expect increase in the limit of the following deductions from the Budget 2023:
Section 80C of the Act for payments/investments towards life insurance premia, contributions to provident fund, subscription to certain equity shares or debentures, etc., is capped at Rs 150,000. With increase in cost of living and increase in inflation, the government should look at increasing the limit under section 80C to Rs 250,000. This will have two-fold benefit – individual taxpayers would be willing to save more and in turn will benefit from a lower tax outgo, thereby increasing their disposable income to meet the rise in prices of various commodities.
Section 80D – Deduction in respect of health insurance premium is capped at Rs 25,000/Rs 50,000. Considering the increase in the cost of medical treatment and insurances, the erstwhile limit under this section is expected to be revisited.
Section 80TTA – It allows deduction of up to Rs 10,000 in the hands of individuals and HUFs, in respect of interest on savings account with banks, post offices and with co-operative societies carrying on business of banking. This benefit should be extended to all types of bank deposits including fixed deposits. Further, the limit should be increased from Rs 10,000 to Rs 50,000 for all.
Section 80EEA – In order to avail a deduction in respect of affordable housing, loans should be sanctioned during the period April 2019 to March 2022. With the rise in demand for residential real estate in metropolitan and Tier-II cities, it is expected that deduction be allowed for the following years as well. The condition for availing loan should be extended for at least 3 years i.e. up to 31st March 2025.
Section 80EEB – Deduction in respect of purchase of electric vehicle is available only if loan has been sanctioned by the financial institution between April 2019 and 31st March 2023. The condition for availing such loan should be extended by at least 2 years i.e. up to 31st March 2025.
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