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Will the Government Raise the Section 80C Deduction Limit in the Upcoming Union Budget 2024?

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If you are a salaried individual, you must have thought many times whether the Union Budget 2024 will increase the deduction limit under Section 80C. Guess what, you aren’t the only one, as crores of taxpayers across India are asking the same question. The last time this deduction was raised was way back in 2014.

So, the question is, will the government do it in this budget? Some experts think that the government may raise the deduction from Rs. 1.5 lakhs to Rs. 2.5 lakhs to account for the impact of inflation over the last 10 years. But, some experts are not so optimistic for a few reasons.

One, all these deductions are allowed under the old tax regime and not under the new tax regime. The government has already offered low tax rates under the new regime. It may be a bit too much to expect the government to allow Section 80C deductions under the new regime as well.

Besides, the government may find other ways to reduce the tax liability of the middle class. That said, the government may offer the deductions under the new regime to woo salaried individuals.

There are arguments for and against the government raising the deduction under Section 80C. Read on, as we explain what the deduction limit is under this section and how the government may take a decision in the regard. 

On budget day, remember to visit the website of Bajaj Broking because we will decode the complex announcements related to tax laws here in the simplest possible language. After all, Bajaj Broking believes #BudgetSimpleHai!

#BudgetSimpleHai


To simplify this year's Budget and its impact on your life and investments, we bring you #BudgetSimpleHai!

 

Visit our website or follow our social handles for live updates on the Union Budget. Read in-depth reports, watch videos, and understand what's in store.


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Introduction to Section 80C and its Current Limit

Section 80C is one of the most important sections of the Income Tax Act. Under this section, salaried individuals can make certain investments or pay some expenses and claim tax deductions for it. To simply explain, suppose you make an investment of ₹50,000 in an instrument allowed under Section 80C, your taxable income will be reduced to the extent of ₹50,000. If you fall under the 20% tax bracket, your tax liability will be reduced by ₹10,000 (₹50,000 * 20%).

You may ask what kind of investments and expenditures are allowed under this section. The following investments and expenditures are permitted.

  • Premiums paid on account of life insurance policies.

  • Investments in your public provident fund (PPF) account and national savings certificates (NSC).

  • Investments in equity-linked savings schemes (ELSS).

  • If the principal amount of a housing loan is being repaid, such an amount is exempt.

  • Premiums paid for unit-linked insurance plans (ULIPs).

  • Investments in tax-saving fixed deposits with a lock-in period of five years at least.

Put together for all the options listed above, a taxpayer can get a deduction of Rs. 1.5 lakhs. Suppose you have invested Rs. 1.5 lakhs in PPF alone, you can get the entire amount tax deducted. Besides, you can invest in other options like ELSS, but you won’t get any tax deduction because you’ve already got a deduction for Rs. 1.5 lakhs. Having learnt what the deduction limit is under this section, let’s delve deeper into this topic.

Historical Changes in Section 80C Deduction Limits   

1.  Section 80C came into being in 2005. Prior to 2005, such deductions and exemptions were available under Section 88.

2.  In 2005, the maximum deduction allowed under Section 80C was Rs. 1 lakh.

3.  Then, in 2014, when Mr. Arun Jaitley was the Finance Minister, this limit was increased to Rs. 1.5 lakhs.

4.  However, since 2014, the deduction limit under Section 80C has not been increased.

5.  This is why many experts think that this budget should increase the deduction limit under this section.

Expectations and Speculations for Union Budget 2024

  • As per certain experts, there’s a possibility that the budget will raise the deduction under Section 80C from Rs. 1.5 lakhs currently to Rs. 2.5 lakhs

  • As this deduction limit has not been increased in the last 10 years, the government may do so to account for the impact of inflation.

  • However, there are experts who think that the government is unlikely to increase the deduction limit under this section. This is because all these deductions are available under the old tax regime and not under the new tax regime. And, the government wants people to move away from the old regime.  

Conclusion

If you are a middle-class taxpayer, this budget may end up being a monumental event for you. In case the budget increases the deduction limit under Section 80C, it will be the first time this will happen in 10 years.

If that happens, you should aim to invest your tax savings wisely. You can open a demat account and start investing in equities or mutual funds. However, if the government doesn’t increase the deduction under Section 80C, it may still offer you relief through other tax-related measures.

Watch this space because Bajaj Broking will decode the budget and its impact on the Indian stock market in the simplest possible language. Meanwhile, you can read expectations from Union Budget 2024 here and key areas of the budget here.

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing. This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

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Frequently Asked Questions

Has the Section 80C deduction limit been raised in previous Union Budgets?

Answer Field

Yes, in the 2014 Union Budget, this deduction limit was increased from Rs. 1 lakhs to Rs. 1.5 lakhs.

What factors typically influence changes in Section 80C deduction limits?

Answer Field

The existing tax burden of taxpayers and inflation are factors that typically influence changes in the deduction limit under this section.

What are the expectations from taxpayers and financial experts regarding the upcoming Union Budget 2024?

Answer Field

Certain experts expect the government to increase the deduction limit under Section 80C in this budget.

How might an increase in the Section 80C deduction limit impact my tax savings?

Answer Field

If this deduction limit is increased, salaried individuals will be able to save their tax. Hence, they will have more tax savings than they have currently.

Are there alternative tax-saving avenues taxpayers should consider if the Section 80C limit remains unchanged?

Answer Field

This can vary from one taxpayer to another. However, taxpayers can opt for the new tax regime. Under this, they don’t have to pay any tax if their annual income is equal to or less than Rs. 7.5 lakhs.

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