Budget 2024 income tax: Section 80C limit needs to be hiked; here’s why

Interim Budget 2024: The Union Budget 2024 to be presented by Finance Minister Nirmala Sitharaman should look to provide relief to taxpayers, say experts. One common ask every year is that the limit for deductions under Section 80C should be hiked from Rs 1.5 lakh. This limit was last revised in the 2014-2015 Budget from Rs 1 lakh.
Section 80C is a popular one under the Income Tax Act, commonly used by salaried income taxpayers to claim tax deductions for investments and expenses.Some of the common investments that can be claimed as deductions under Section 80C are:

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

Why Section 80C limit should be hiked

Surabhi Marwah, Tax Partner, EY India points out that the limit of Rs 1,50,000 for deductions under Section 80C has remained the same for the last nine years (it was last revised in tax year 2014-15).
“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, this limit should be hiked to at least Rs 250,000,” Surabhi tells TOI.

Chander Talreja, Partner at Vialto Partners too says that with multiple options available for deduction under Section 80C, the present capping may get exhausted amongst the most common of them like employee’s PF contribution, LIC premium, PPF deposit etc. According to Chander Talreja, the government may consider increasing the said limit by another Rs 50,000/-. “Few options which may merit addition to the current list options of expenses are fee paid for upscaling certification courses, executive programmes, AI technology curriculums etc,” he tells TOI.

Parizad Sirwalla, National Leader, Global Mobility Services – Tax, KPMG in India advocates for independent limits for critical investments and expenses. Investments/ expenses eligible for total deduction of Rs 1.5 lakh under Section 80C is a bundled basket, Parizad points out.
“Hence, 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 rather than add more options in the basket,” she tells TOI. “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 approx. Rs 1 lakhs,” she elaborates, adding that from an overall deduction quantum perspective, every year the wish list is for the limit to be doubled to Rs 3 lakh.

Will Budget 2024 hike Section 80C limit?

Experts are of the view that the Interim Budget is unlikely to tinker much on the income tax front, and hence any change in Section 80C limit is not expected on February 1, 2024.

Parizad Sirwalla tells TOI, “This being an interim budget/ vote-on-account it is prudent not to expect major changes to the individual tax regime.”
Chander Talreja is of the view that given the government’s focus is to encourage new personal tax regime (as per the trend in the last few budgets) it would be a bit challenging to hike the 80C limit, as presently, the said deduction is not allowed in New Personal Tax Regime.

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