Individual taxpayers, especially salaried ones, frequently rely on section 80C deductions and exclusions to reduce their taxable income by up to 1.5 lakh rupees per fiscal year. One can obtain these exemptions by making a few pre-specified investments. According to income tax specialists, Form 80C is a crucial tool in the hands of the taxpayer because it encourages saving in addition to helping to reduce taxes.
2023 Budget Expectations: Will the Government increase the Section 80C limit?
Now is the time of year when income tax assesses anxiously watch for any statement relating to the tax rules in the yearly Budget presented by the Finance Minister. One of the most well-liked ways for the average person to reduce their income tax liability is through Section 80C of the Income Tax Act. Individual investors and financial and tax professionals anticipate that the government will increase the Section 80C deduction cap from Rs 1.5 lakh/year to at least Rs 2 lakh or Rs 2.5 lakh in the Budget 2023 be unveiled on February 1. If the increase is announced, it will assist individual taxpayers in lowering their yearly tax burden and encourage savings and investments in plans that are eligible for Section 80C deductions.
According to experts, the government will update tax rates and slabs for the advantage of taxpayers in Budget 2023. Section 80C of the Income Tax Act is under fire for having too many deductions, according to experts, who believe that it is now complicated and useless for tax planning. The previous review of this section took place in 2014; since then, income and other contributions, such as provident fund contributions, have increased significantly.
The area inside 80C has diminished as a result
One of the main factors influencing people to invest in things like real estate and life insurance is Section 80C, which permits tax benefits of up to Rs 1.5 lakh. Insurance professionals believe that raising the Section 80C limit to at least Rs. 2 laks will encourage more people to purchase term insurance policies for their families financial security. Not only that, but the housing industry has long pushed for an increase in the Section 80C cap since it will help the real estate market. The real estate industry has long advocated for a distinct section under 80C for the repayment of the mortgage principal.
The home loan repayment deduction allowed by section 80C is Rs 1.5 lakh, and the interest deduction allowed by section 24 is Rs 2 lakh. When the cap on Equity-Linked Savings Plans was raised to Rs. 1.5 lakh under 80C, investments significantly surged. Any modifications to the 80C will result in significant tax reform and encourage more people to use tax planning.
Will these changes in the Budget 2023 affect the Average Taxpayer?
Even though the government only has a small amount of financial leeway, these minor adjustments might impact compliance. To lower the income subject to taxes, the income tax assessee must provide documentation of savings in qualified areas totalling up to Rs 1.5 lakh per year. Tax experts predict that the budget will include modifications to Section 80C deductions that will be advantageous to income tax assessees.
In Budget 2023, a rise in the Section 80C deduction cap would mark the first such change in nine years. The most recent rise, from Rs 50,000 to the current Rs 1.5 lakh, occurred in 2014. However, people choosing the new tax system are not eligible for 80C deductions.