Budget 2018: Will the government increase section 80C limit?
There are a lot of expectations from Finance Minister Arun Jaitley when he presents the Union Budget 2018 on February 1. From businessmen to the common man, every individual is expecting something from the Budget. While some are speculating that the Finance Minister could rejig the tax slabs, other are expecting an increase in the limit for investment in tax-saving schemes.
Presently, deduction of a maximum Rs 150,000 is allowed to all individual taxpayers for investing in various tax saving schemes, such as EPF, PPF, life insurance schemes, National Savings Certificates, ELSS, etc. under section 80C.
The increase in Section 80C limit will allow individuals to save more. An Economic Times report states that section 80C could see an increase in its limit from the existing Rs 1.5 lakh a year to Rs 2 lakh or possibly even higher in Budget 2018.
"We expect Budget 2018 to increase the Section 80C investment limit for tax saving from the current Rs 1.5 lakh to Rs 2 lakh," the ET report quoted Sonu Iyer, tax partner and people advisory services leader, as saying.
There are several investment schemes like Public Provident Fund (PPF), Tax-saving Fixed Deposits (FD), National Pension System (NPS) and National Savings Certificates (NSC), which can be used to avail benefits of provisions under section 80C.
There are three important payments which are eligible for claiming tax rebate under 80C.
- Life insurance premium
- Children's tuition fees
- Repayment of home loan
Why it makes sense to increase 80C limit:
In case of taxpayers who are paying children's tuition fees and paying equated monthly instalments (EMI)s on a home loan the section 80C cap of Rs 1.5 lakh may not be enough. Even for individuals with high basic salary, a major portion of section 80C would get exhausted by the EPF contributions itself.
The annual premium paid for life insurance in the name of the taxpayer or the taxpayer's wife and children is an eligible tax-saving payment under Section 80C. The deduction is valid only if the premium is less than 10% of the sum assured. If Budget 2018 increases the section 80C limit for term insurance plans it could help increase insurance coverage (in terms of sum assured) in the country.