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Instead of the new tax system introduced in the budget of the year 2020, most of the people are preferring the old tax system. This is because they like to use various deductions to save more tax in it. Section 80C was changed in the 2005 budget. Then the starting limit was Rs 1 lakh. In 2014-15, Finance Minister Arun Jaitley increased it to Rs 1.5 lakh per financial year. Since then there has been no increase in it.
The increase in 2014-15 is expected to increase this limit again after eight years. Middle class taxpayers need to be given relief from backbreaking inflation. The continuous increase in the cost of living has hit the middle class people the most. Loan installment has also increased due to rising interest rates. This has further strained the household budget and reduced earnings.
Tax savings will increase investment
Tax experts point out that the circumstances are such that they warrant an increase in the limit. Tax deduction can motivate people to invest. When the Modi government came to power again in the year 2019, most of the individual taxpayers were expecting a big relief from this government. But this has not happened in the last three budgets. Next year the government may go for vote on account. In such a situation, the government can give some relief to the middle class taxpayers before the general elections.
compulsion to increase the limit
Since inflation has not been such a major concern during the tenure of the present government. So now this situation may force the government to increase the limit of 80C, the most popular tax saver among middle class taxpayers. The Cost Inflation Index (CII) in 2014-15 was 240. It is now 331 and if the current inflation rate is also considered at 6 per cent, it comes to around 351 for the next financial year. That is why this increase is being discussed now. Accordingly, the current limit should be around Rs 2.19 lakh.
nExperts say that investment in PPF and other tax saving schemes should be allowed as a deduction. The budget should raise the 30% tax limit under the concessional income tax regime to Rs 20 lakh, to make it attractive to middle-income taxpayers.
You can claim exemption under 80C on more than 10 things
There are more than 10 items, including expenses and investments, for which a taxpayer can claim deduction under section 80C. Salaried individuals, in particular, eliminate the deduction limit of Rs 1.5 lakh with the mandatory contribution to the Provident Fund (PF). This leaves less scope for claiming deduction for repayment of home loan principal, premium for life insurance policies, investments in small savings schemes, equity linked savings schemes etc. In such a situation, if one wants to invest for a long time and wants to save tax, then this limit falls short.
need to incentivize taxpayers
It should not be forgotten that over a period of time the value of money or investment depreciates due to inflation etc. In order to provide incentive to the taxpayers to save and invest, the existing limit may be considered to be increased to Rs 2.5 lakh. Ajay Kumar Singh, CA.