You will get big benefits from increasing the limit of Section 80C, know how – Variousinfo

Taxpayers can get big relief in the upcoming budget 2025. The limit of Section 80C is expected to be increased in this budget presented by Finance Minister Nirmala Sitharaman. This step can prove to be very beneficial for the middle class and salaried employees.

The limit of tax exemption available under Section 80C has remained stable at Rs 1.5 lakh for the last several years. In view of inflation and rising cost of living, there was a demand for increasing this limit for a long time. Now it seems that the government may consider this demand and increase this limit in Budget 2025.

What is Section 80C?

Section 80C is an important provision of the Income Tax Act that gives taxpayers the benefit of tax exemption on certain specified investments and expenses. Under this, individual taxpayers and Hindu Undivided Families (HUF) can claim a deduction of up to Rs 1.5 lakh from their taxable income.

Highlights of Section 80C

What investments and expenses are covered under Section 80C?

Under Section 80C, there are many types of investments and expenses which get the benefit of tax exemption. Let us understand these in detail:

investment options

• Public Provident Fund (PPF): It is a popular long-term investment option with a lock-in period of 15 years.
• Equity Linked Savings Scheme (ELSS): It is a type of mutual fund which has a lock-in period of 3 years.
• National Savings Certificate (NSC): It is a government savings scheme with a lock-in period of 5 years.
• Sukanya Samriddhi Yojana: This is a special savings scheme for daughters with a lock-in period of 21 years.
• Tax Saving Fixed Deposit: This is a bank deposit with a lock-in period of 5 years.

Insurance and Pension Schemes

• Life Insurance Premium: The premium for a life insurance policy taken for yourself, your spouse or children.
• Unit Linked Insurance Plan (ULIP): It is a mix of insurance and investment.
• National Pension Scheme (NPS): This is an optional pension scheme with an additional deduction of Rs 50,000 under section 80CCD(1B).

Expenditure

• Tuition Fees: School or college tuition fees for up to two children.
• Home Loan Principal: Payment of the principal amount of the loan taken to buy or construct a house.
• Stamp duty and registration charges: Stamp duty and registration charges paid on purchasing a house.

Possibility of increasing section 80C limit in Budget 2025

Finance experts believe that in Budget 2025, the government can increase the limit of Section 80C from Rs 1.5 lakh to Rs 2 lakh or Rs 2.5 lakh. Many reasons account for this:

1. Increase in inflation: Inflation has increased significantly in the last few years, due to which the saving capacity of people has been affected.
2. Increase in cost of living: There has been a huge increase in the cost of basic needs like education, health and housing.
3. Investment encouragement: The government wants people to save and invest more, which will strengthen the economy.
4. Relief to the middle class: This step can prove to be a big relief for the middle class and salaried employees.

What will be the benefits of increasing the limit of Section 80C?

If the limit of Section 80C is increased in Budget 2025, there can be many benefits:

1. Increase in tax savings: Taxpayers will get an opportunity to save more tax, which will increase their disposable income.
2. Opportunity to invest more: People will be able to invest more, thereby strengthening their long-term financial security.
3. Encouragement to savings: This step will motivate people to save more, which is beneficial for the economy.
4. Improvement in financial planning: Taxpayers will be able to plan their financial plans better and avail various investment options.
5. Increase in pension and insurance coverage: People will be able to invest in more pension and insurance schemes, thereby increasing their future security.

How to plan if Section 80C limit increases?

If the limit of Section 80C increases in Budget 2025, then you can do your tax planning in this way:

1. Diversify investments: Divide your investments across different options like PPF, ELSS, NSC.
2. Focus on long term investments: Invest in long term schemes like PPF and NPS which will help in retirement planning.
3. Increase Equity Investment: Enjoy the benefits of the equity market by investing in ELSS funds.
4. Increase insurance coverage: Get adequate life insurance coverage for yourself and family.
5. Avail Home Loan: If you have taken a loan to buy a house, then show the principal payment under Section 80C.
6. Plan for children’s education: Save children’s tuition fees and tax by investing in Sukanya Samriddhi Yojana.

Tax saving options other than Section 80C

Apart from Section 80C, there are many other sections under which tax savings can be made. Some of the prominent ones are:

1. Section 80D: Deduction on health insurance premium.
2. Section 80E: Deduction on interest on educational loan.
3. Section 24: Deduction on home loan interest.
4. Section 80G: Deduction on donations to charity.
5. Section 80TTA: Deduction on interest received on savings account.

Importance of section 80C in the new tax system

In 2020 the government introduced a new alternative tax regime which has lower tax rates but no exemptions. This means that taxpayers opting for the new tax regime cannot avail the benefits of section 80C.

However, many people are still opting for the old tax system as they feel that they can save more tax with various exemptions and deductions. Therefore the importance of section 80C still remains.

Disclaimer

This article is for informational purposes only. Budget 2025 and possible changes in the limit of Section 80C are currently based on estimates. Actual budget announcements and tax rules may differ from this. Please consult a registered tax advisor or financial advisor before taking any financial decisions. The author or publisher is not responsible for any loss or damage caused by the use of this information.