Union Budget 2024: The government reportedly plans to raise the income threshold for tax liability from the current Rs 3 lakh to Rs 5 lakh in the forthcoming budget.
Section 80C Deduction Budget 2024: Each year, numerous taxpayers look forward to the finance minister increasing the Section 80C limit in the Union Budget 2024. The current 80C limit has not been adjusted to match rising incomes and expenses. Consequently, many taxpayers find themselves maxing out the entire 80C limit.
There has been no official announcement about an increase in the Section 80C deduction limit for Budget 2024. The current limit is Rs. 1.5 lakh, which hasn’t changed since 2014. Many taxpayers and financial experts are expecting an increase due to rising inflation.
Read More: ITR-1 (Sahaj): Documents you must keep at hand before filing returns
What Is Section 80C?
Section 80C is a provision under the Income Tax Act of India that allows taxpayers to claim deductions on certain investments and expenses, reducing their taxable income. The maximum deduction limit under Section 80C is Rs 1.5 lakh per financial year.
By investing in or spending on qualifying items under Section 80C, you can lower your taxable income. This can bring you down to a lower tax bracket and save you money on taxes owed.
Section 80C covers many popular investment options like Public Provident Fund (PPF), Equity Linked Savings Schemes (ELSS), and Unit Linked Insurance Plans (ULIPs). This incentivizes saving and long-term financial planning.
Read More: 6 ways to save tax without making any investment
Why Does Section 80C Limit Need to Increase?
There are a couple of main arguments for increasing the Section 80C deduction limit;
- Rising cost of living and inflation: The current limit of Rs. 1.5 lakh has been in place since 2014. Inflation has eroded its purchasing power over time. An increase would allow people to invest or spend on necessary things like education and retirement planning without exceeding the deduction limit.
- Increasing financial goals: The cost of necessities like education and healthcare has risen significantly. The current limit might not be enough to cover these expenses and still invest adequately for retirement. Raising the limit would give taxpayers more flexibility to plan for their future financial needs.
- Encourages long-term savings: A higher limit could incentivise people to save more for the future, which would benefit the overall economy.
Supports the middle class: Many middle-class taxpayers rely heavily on Section 80C deductions to reduce their tax burden. An increase would provide them with some tax relief.
Read More: ITR Filing 2024: 10 Alternative Options To Save Income Tax Other Than 80C
Standard Deduction To Be Increased?
The finance ministry is reportedly considering raising the standard deduction limit for income taxpayers under the new regime without altering the tax exemption-heavy old regime, as reported by TOI.
In the Budget 2023, the finance minister implemented a standard deduction of Rs 50,000 for salaried taxpayers and pensioners under the new tax regime. This standard deduction became the default unless taxpayers chose to opt-out.
Moreover, the rebate under Section 87A was increased for taxable incomes up to Rs 7 lakh under the new tax regime. As a result, individuals with taxable incomes within this threshold became exempt from paying taxes under the new regime.
Tax Limit Expected To Be Increased
The government is reportedly considering measures to potentially reduce personal income tax rates. This move aims to bolster GDP growth by stimulating consumption amid subdued spending levels among the middle class.
The government plans to raise the income threshold for tax liability from the current Rs 3 lakh to Rs 5 lakh in the forthcoming budget.
This adjustment is intended exclusively for taxpayers under the new regime, aiming to increase disposable income, particularly among lower-income groups.
More Voices For Tax Rebate
India Inc. has also pitched for lowering the income tax burden on the common man.
President of industry body CII Sanjiv Puri put forth eight points for consideration for the finance minister. These include relief in income tax at the lower end of income slabs, streamlining of employment inked incentive schemes like Production Linked Incentive (PLI), and promoting ease of doing business. CII also made recommendations for agriculture and rural development.
