Presently the investments and expenditures up to a combined limit of Rs 1 lakh get exemptions under Sections 80C, 80CC and 80 CCC of the Income-Tax Act.
Sources said the revenue department is assessing the burden on the exchequer in case of increase in the benefit limit. The announcement is expected in the Budget.
The Budget for 2014-15 will be presented by Finance Minister Arun Jaitley in the Lok Sabha on July 10.
There have been demands from bankers and insurers to hike the tax exemption limit from Rs 1 lakh per annum to encourage household savings.
The savings rate has come down from over 38 per cent of GDP in 2008 to 30 per cent in 2012-13.
The hike in the exemption limit, sources said, would provide much needed relief to the salary earners who are reeling under the impact of high inflation.
The Direct Taxes Code (DTC) too has recommended that the combined ceiling for investments and expenditures be raised to Rs 1.5 lakh per annum.
The financial instruments which enjoy exemption include life insurance premium, public provident fund, employees provident fund, National Savings Certificates, repayment of capital on home loan, equity linked saving schemes sold by mutual funds and bank FDs of five year maturity.