Section 80C deduction in Budget 2024: Will the government increase Section 80C limit under the old income tax regime in Budget?

Section 80C deduction in Budget 2024: Will the government increase Section 80C limit under the old income tax regime in Budget?

Many taxpayers choose the section 80C benefit as their preferred tax-saving option. Under section 80C of the Income Tax Act, 1961, individuals can avail a maximum deduction of Rs 1.5 lakh for the fiscal year 2024-25 if they opt for the old tax regime. Those who choose the new tax regime are not eligible to avail of this deduction.

During his tenure, the 80C benefit limit was raised to Rs 1.5 lakh annually by the then finance minister, Arun Jaitley, in 2014. This change was one of the major forms of relief given by the government in its first budget. However, since then, there has been no adjustment to the 80C limit. This year signifies a decade since the last increase in 2014.

Income tax relief: Budget 2024 may increase standard deduction under new income tax regime

Every year, many taxpayers hope the finance minister will raise the Section 80C limit in the Union Budget 2024.
The 80C limit has not increased in line with many people’s income and costs. Because of this gap, many taxpayers end up using up the entire 80C limit.

What is the section 80C benefit?

Under section 80C, the maximum tax deduction allowed to the taxpayer is Rs. 1.5 lakh. However, the taxpayer is free to invest in one or more savings vehicles.Also read: Income tax deductions available under section 80C in IndiaThe deduction under section 80C is available only to individuals and Hindu Undivided Families (HUFs. Taxpayers can claim the deduction for investments in specified savings plans or for payments towards specific investments and expenses covered under the 80C category.

Why the section 80C limit should be increased

An individual’s taxable income is calculated by deducting the amount of his eligible section 80C deduction from his gross total income. Therefore, any change in the section 80C deduction cap directly affects an individual’s taxable income and, in turn, their tax obligation.

For many, costs have risen, salaries have gone up, but the section 80C benefit has not kept pace. Due to this many end up exhausting the limit quickly. That is why increasing the limit in section 80C is always a top priority for taxpayers before the budget each year.

The cost of living has significantly increased, compounded by the adverse impact of the pandemic. The increase in section 80C limit will help individuals increase their savings, which is necessary considering the current rate of inflation.

  • It reduces individual’s tax burden
  • It helps them save for financial goals such as retirement, children education, etc.
  • Facilitates home purchase
  • It provides a sense of security to them.

How to claim Section 80C deduction

In order to qualify for the Section 80C deduction from gross taxable income, an individual must make an investment in designated expenditure. Once a person has entered all of their income and arrived at their gross taxable income, they claim the deduction on the ITR form. The net taxable income is obtained by deducting certain amounts from this income. The tax liability is computed on this net taxable income.

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