Individual taxpayers are eagerly hoping that the Budget 2018 be a more common man friendly one when compared to that of last year. In fact, one of the many speculations last year was an increase in the deduction that can be claimed under Section 80C from Rs 1.5 lakhs to Rs 2 lakhs. Much to the disappointment of individual taxpayers, was not announced.
Section 80C provides a tax break of up to Rs 1.5 lakhs for investments made by individuals or HUFs in tax-saving investments such as PPFs, EPFs, mutual funds / ELSS, fixed deposits OR premium paid towards a life insurance policy, principal component of a housing loan repayment, expenses on children’s tuition fee and many more.
This year, once again, there is a hope that this limit under Section 80C would be raised by the government. The individual taxpayers would undoubtedly benefit immensely out of this move. Such benefit would be two-fold. How do we say this? For example, you can invest in ELSS which can be claimed as a deduction under Section 80C. ELSS has of late gained a lot of popularity among the investor taxpayers in terms of better returns, shorter lock-in period, tax-free gains on redemption etc. Individual taxpayers would be happy to save more and also, in turn, benefit from the lower tax outgo.
From the government’s perspective, this being an impetus to invest more. The government, in turn, would also stand to gain as taxpayers would choose to invest in those avenues prescribed under Section 80C than lock up their surplus funds in unproductive assets. This would definitely turn out to be a win-win move for both the government and the taxpayer.
Interestingly, there are also speculations that the raise under Section 80C to the extent of Rs 50,000, would be exclusively for a claim of deduction of principal amount repaid towards a housing loan by a taxpayer. If this is the proposal, taxpayers would be encouraged to pre-pay their housing loans, which, so far, has been considered futile by the taxpayers, given the absence of any benefit upon the pre-payment.
Clarity in all these aspects would emerge only once the budget is out. So let’s have our fingers crossed, wait and watch!