Budget 2024: Increase in Section 80C limit possible

Section 80 C

Budget 2024: Experts advise that the Union Budget 2024, which Finance Minister Nirmala Sitharaman will present, should focus on helping taxpayers. A request is made to increase the annual maximum deduction under Section 80C from Rs 1.5 lakh. The 2014–2015 Budget was the last time this cap was changed from Rs 1 lakh.

The Income Tax Act has a well-known section, 80C, that salaried income taxpayers frequently use to claim tax deductions for investments and expenses.

Will the limits on Section 80C deductions be raised by the interim budget, which is set to be presented on February 1st? Because this section was only available under the previous tax system, tax experts said it was extremely unlikely. Section 80C tax deductions are not permitted under the new income tax system.

Read also: Income Tax planning Tips for Salaried Employees FY 2023-24

Here are some important investments that provide you with Section 80C benefits if you have begun your tax planning for FY24 and are still paying taxes under the old tax system.

Common investments that qualify for Section 80C deductions include the following:

  • PPF
  • PF
  • ULIP
  • ELSS
  • Life Insurance Premiums
  • Sukanya Samriddhi Yojana
  • NSC

Why raising the Section 80C limit is necessary

The limit of Rs 1,50,000 for deductions under Section 80C has not changed in the last nine years, according to Surabhi Marwah, Tax Partner, EY India (it was last revised in tax year 2014–15).

“This limit should be hiked to at least Rs 2,50,000 considering the inflation over the years and the fact that most of this limit is utilised by contribution to provident fund and principal repayment of housing loan,” Surabhi says.

The current capping among the most popular deduction options under Section 80C, such as employee PF contributions, LIC premiums, PPF deposits, etc., may run out, according to Chander Talreja, a partner at Vialto Partners. Chander Talreja says the government might think about raising the aforementioned cap by an additional Rs 50,000. He says, “There are a few options that might be worth adding to the current list of expenses: fees for upscaling certification courses, executive programs, AI technology curriculums, etc.”

Parizad Sirwalla, National Leader, Global Mobility Services – Tax, KPMG India, is a supporter of setting separate spending and investment caps. Parizad notes that a bundled basket of investments and expenses qualifies for a total deduction of Rs 1.5 lakh under Section 80C.

“Therefore, rather than adding more options to the basket, there has historically been an expectation to carve out certain critical investments / expenses out of Section 80C and provide a separate limit for the same,” she added. She explains, “Repayment of housing loan deduction is one such where a separate carve out can be considered and a separate deduction may be evaluated to the tune of approximately Rs 1 lakhs.” She also says that, in terms of the total amount of deductions, the annual goal is to double the cap to Rs 3 lakh.

Read also: Income Tax Department targeting employers and employees for TDS-claims mismatch

Will Section 80C be raised in Budget 2024?

According to experts, there won’t likely be any changes made to the income tax front by the Interim Budget, so on February 1, 2024, there won’t likely be any changes made to the Section 80C limit.

“Given that this is an interim budget and vote-on-account, it is prudent not to expect major changes to the individual tax regime,” says Parizad Sirwalla.

According to Chander Talreja, it would be difficult to raise the 80C limit because the government’s goal is to promote the new personal tax regime (as has been the case in the last few budgets). This is because the deduction is currently prohibited under the new personal tax regime.

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