As the eagerly awaited interim budget presentation by Finance Minister Nirmala Sitharaman approaches on February 1, the spotlight is on potential modifications to Section 80C of the Income Tax Act. Section 80C has long served as a key avenue for individuals seeking to reduce their taxable income through deductions on specific investments and expenditures, promoting long-term financial security.
The current maximum deduction limit under Section 80C is set at Rs. 1.5 lakh, covering various investments such as life insurance premiums, contributions to the Employee Provident Fund (EPF), investments in the Public Provident Fund (PPF), National Savings Certificates (NSC), tuition fees, home loan principal repayment, and Equity-linked Saving Scheme (ELSS) mutual funds. This limit has prompted many individuals to strategically leverage these deductions for tax savings while securing their financial future.
In the lead-up to the budget announcement, there is a growing expectation among salaried individuals for potential changes to Section 80C. Rahul Charkha, Partner at Economic Laws Practice, highlighted the trend of increased investment in eligible instruments under Section 80C. He noted a significant rise in expenses on life insurance premiums, tuition fees, and home loan principal repayments, leading many taxpayers to exhaust the existing limit of Rs. 1.5 lakh.
Charkha emphasized the taxpayer community's expectations for an increase in the Section 80C limit, proposing that, given the rise in the cost of living and retail inflation, the practical limit should be raised to as much as 3 lakhs.
Anticipating the Finance Minister's innovative approach, Charkha speculated on the possibility of an inflation-linked scheme. He suggested that such a scheme, directly linked to the inflation rate, could alleviate the need for frequent increases in the limit.
As the nation awaits the upcoming budget, particularly those in the middle-income bracket, individuals will be keenly observing any adjustments to Section 80C that could impact their tax planning strategies and overall financial outlook. The Finance Minister's budget speech on February 1 is expected to provide insights into the government's stance on these vital tax-saving provisions.
