Whenever a Budget is introduced in the Parliament, the middle income group primarily eye Section 80C of the Income Tax Act as it is the most popular and favourite section affecting the nett tax liability of the taxpayers. The rationale behind this deduction is to induce savings by investing in tax saving investments or incurring eligible expenses under Section 80C of the Income Tax Act 1961.Under this benevolent provision the taxpayers can claim deduction on payments/contributions/ investments in LIC, GPF/EPF/PPF or recognised superannuation fund, NSC, ULIP, Sukanya Samriddhi Yojana, 5-year tax-saving FDs by banks, payment of tuition fees, 5-year post office time deposit, Senior Citizens Savings Scheme, ELSS of a mutual fund, repayment of Housing Loan Principal etc.
The maximum deduction under Section 80C of the Income Tax Act is currently only Rs 1.5 lakh. However, contribution to NPS is further allowable to a limit of Rs. 50,000/-. But, overall the present limit available under Section 80 C is insufficient and not in consonance with the spirit & rationale of this compassionate exemption.
The demand of the middle class assessees is to increase the overall limit of exemption under Section 80 C of the Income Tax Act to Rs. 5,00,000/-. This will be beneficial step for both the assessees & the Government. The middle class people will have higher take home salary which they will ultimately spend. The spending in goods & services attract GST and the coffers of the Government will swell with increased spendings. GST on goods & services is mostly 18% whereas the exemption would fall in the range of 10-20% averaging 15%. Thus the Government would not be a loser by enhancing the said exemption. Moreover, the savings by the assessees benefited by this generous move shall strengthen our economy.
The increase in deduction limit in section 80C will achieves multiple purposes. It will reduce the tax burden of the middle class and would enable them to save for their retirement/old age and would make them impart better financially security. Needless to say that increased savings limits inflation. The investments so made provide low-cost funds to the government. This move will boost housing sector in particular and provide cheaper funds for infrastructure sector & boost infrastructure.
In view of the above, FM Madam is requested to kindly consider the plea of the Income Tax assessees and enhance the monetary limit of exemption u/s 80 C of the Income Tax Act and to thereby bring smile to their faces.