In the upcoming budget 2018, the Government of India might take into consideration increasing Section 80C as the current limit of Rs.1.5 lakh is not enough for many. This would mean that citizens would be able to save more on their take-home pay.
Among several other measures that the government could take to help citizens save more tax, increasing the limit allowed under Section 80C would tremendously help. The increase will compensate for inflation.
At present, from the total gross income, one can claim upto Rs.1.5 lakh for all investments made in life insurance, equity-linked savings scheme, NSC, PPF, 5-year tax deposits, Sukanya Samriddhi Account, EPF, Senior Citizen Savings Scheme along with expenses for tuition fees, repayment of home loan and so on. A person is free to invest the entire Rs.1.5 limit in one avenue or make diverse investments in any of these.
Sonu Iyer, tax partner and people advisory services leader of Ernst & Young, stated that they are expecting an increase from Rs.1.5 lakh to Rs.2 lakh for investments under Section 80C of the Income Tax Act, 1961.This increase would mean a loss of revenue for the government but it is required to keep the limits on par with inflation.
For many taxpayers, this limit is not optimal as it could get exhausted quickly. Those who have Employee’s Provident Fund will see a major part of their investment limit disappear. A limit of Rs.2 lakh would give more room for people to invest in the different avenues available and save more on tax.