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- Key Highlights:
- Budget 2024: Will Section 80C Deduction Limit Finally Increase?
- Tax Relief Measures in Sight in Budget 2024?
- Why Increase the Section 80C Limit?
- Taxpayer Demands and Inflation
- Potential Increase to ₹3 Lakhs in Budget 2024?
- Understanding Deduction under Section 80C of Income Tax Act of 1961
- FAQS - FREQUENTLY ASKED QUESTIONS
Key Highlights:
- Budget 2024 is expected to offer tax breaks to boost consumption, with a potential increase in the tax exemption threshold under the new tax regime from ₹3 lakhs to ₹5 lakhs.
- Section 80C deduction limit is under scrutiny, with hopes for an increase from ₹1.5 lakhs in Budget 2025.
- Reasons for increasing the Section 80C limit in Budget 2024 include rising living costs and inflation.
- Potential benefits of a higher Section 80C limit: reduced tax burden, increased savings, easier homeownership, and greater financial security.
Budget 2024: Will Section 80C Deduction Limit Finally Increase?
Taxpayers across India are eagerly waiting for the Union Budget 2024, scheduled for presentation by Finance Minister Nirmala Sitharaman on July 23rd or 24th. Experts suggest the government might offer tax breaks to boost consumption and economic growth.
Tax Relief Measures in Sight in Budget 2024?
One potential measure gaining traction is an increase in the tax exemption threshold under the new tax regime. Media reports suggest this could rise from ₹3 lakhs to ₹5 lakhs. Additionally, tax slabs under the old regime might be rationalised. These changes aim to provide tax relief to specific taxpayers and stimulate middle-class spending, further propelling GDP growth.
Focus on Section 80C of Income Tax Act Deduction
However, the government's focus on fiscal deficit consolidation could limit major tax relief measures. Their target is to maintain a deficit of 5.1% of GDP for the current financial year.A key area of taxpayer interest lies in the Section 80C deduction limit under the Income Tax Act, 1961 (Sec 80C of Income Tax Act 1961). This limit hasn't been revised in a decade since it was raised to ₹1.5 lakh by then-finance minister Arun Jaitley in 2014. Also Read: Budget 2024: What Is a Budget? Why Is It Important?
Why Increase the Section 80C Limit?
- Popularity of Section 80C of Income Tax Act: This deduction remains a popular tax-saving option, particularly for those under the old tax regime. It allows individuals to reduce their taxable income, thereby lowering their tax liability .
- Growing Awareness, Increased Investments: Growing awareness of tax benefits has led to increased investments in eligible instruments under Sec 80C of Income Tax Act 1961. These instruments include:
- Equity Linked Savings Schemes (ELSS): Mutual fund schemes that invest in a combination of stocks and bonds .
- Public Provident Fund (PPF): A long-term savings scheme backed by the government, offering attractive interest rates and tax benefits.
- Unit Linked Insurance Plans (ULIPs): Life insurance policies that combine investment and insurance benefits, with premiums qualifying for Sec 80C deduction.
- Employee Provident Fund (EPF): A retirement savings scheme for salaried individuals, where contributions from both employee and employer qualify for deduction.
- Rising Costs Outpace Limit: These rising costs, such as education expenses and home loan EMIs, often cause individuals to max out the current ₹1.5 lakh limit.
Also Read : Budget 2024: Higher Standard Deduction in New Tax Regime
Taxpayer Demands and Inflation
Taxpayers have long expressed their desire for an increase in the Section 80C deduction limit in Budget 2024. Rising living costs and inflation have significantly outpaced adjustments made to Sec 80C. Experts believe raising the limit would:
- Encourage Savings and Investments: A higher limit would allow individuals to invest more towards their financial goals, like retirement planning or children's education.
- Provide Additional Tax Relief: A larger deduction translates to a lower tax burden, leaving individuals with more disposable income.
- Better Reflect Inflation Trends: Raising the limit would help account for the rising cost of living and ensure individuals can continue to benefit from tax deductions.
Public demand is strong, with many advocating for an increase to at least ₹2 lakhs to ₹2.5 lakhs.
Potential Increase to ₹3 Lakhs in Budget 2024?
There's speculation that the upcoming Budget 2024 might see the Section 80C deduction limit for the old tax regime rise to ₹3 lakhs. This potential change is seen as a way to address rising inflation and living costs.
Balancing Growth and Tax Relief
Pre-budget talks between the Finance Minister and industry bodies began in June 2024. Experts anticipate the government will strive for a balance between stimulating economic growth, controlling inflation, and fulfilling promises made during the election. Also Read: Budget 2024: Top 4 Expectations From Finance Minister Nirmala Sitharaman
Understanding Deduction under Section 80C of Income Tax Act of 1961
Section 80C of the Income Tax Act allows individuals to claim a maximum deduction of ₹1.5 lakh on their taxable income for the fiscal year 2024-25 if they choose the old tax regime. This benefit isn't available under the new tax regime .
Claiming the Deduction under Section 80C
To claim a deduction under Section 80C of Income Tax Act 1961, taxpayers must invest in designated expenses throughout the year. Once income is determined, the deduction is claimed on the Income Tax Return (ITR) form. This deduction is subtracted from gross taxable income to arrive at net taxable income, which is then used to calculate tax liability.You can claim your deductions and file your taxes in a hassle free manner with Aditya Birla Capital 's EZTax which allows self-filling as well as offers expert assistance in filing taxes. Also Read:
FAQS - FREQUENTLY ASKED QUESTIONS
What is the Union Budget 2024 ?
A financial statement presented by the government on its revenue and expenditure is Union Budget 2024.
How does the interim Budget differ from the Union Budget ?
The Union Budget and the Interim Budget, in India have different roles. The Union Budget is a report that is presented every year. This budget plays a role in setting the agenda and priorities for the entire year.
Whereas the Interim Budget is typically put forth by the government during an election year. When presenting a full Union Budget is not possible. The primary aim of the Interim Budget is to ensure that funding for existing government programs and essential functions continues until a new government comes into power. It focuses on expenses and generally does not introduce new financial policies or economic reforms.
Why is the Union Budget presented ?
The union budget highlights the government's strategy for the upcoming fiscal year detailing all expenses, income and allocations across various sectors and ministries.
Who presents the Budget ?
The Union Budget is presented by the Union Finance Minister.
What are the expectations from Union Budget 2024 ?
Some expectations include potential benefits to the taxpayers and focus on some key sectors like transportation, tourism, investment, infrastructure and agriculture.
How does the Union Budget affect taxpayers ?
The Union Budget impacts individuals and businesses by adjusting tax slabs and rates. By introducing deductions and exemptions and updating tax regulations, the union budget affects personal and corporate financial planning. Moreover, it offers incentives, for industries and sets out long-term economic strategies that shape future tax responsibilities and financial strategies.
Can new policies be introduced in the Union budget ?
The upcoming union budget will see India undertaking many historic economic policies and reforms at a faster pace, President Droupadi Murmu said in her Parliament address.
What is the duration covered by the Union Budget ?
The union budget covers the entire fiscal year.
Where can I watch the Union Budget 2024?
The budget speech will be shown live on the Parliament's official TV channels, including Sansad TV and Doordarshan along with their official YouTube channels.
When is the Union Budget 2024 expected to be presented?
The official dates for the Union Budget 2024 announcement have not been confirmed yet. Reports suggest that it is expected to be presented during the Monsoon Session of Parliament scheduled to start on 22nd July 2024 and conclude on 9th August 2024.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
