Budget 2017 should increase the limit of tax deduction under Section 80C to Rs 2.5 lakh from the present Rs 1.5 lakh, recommends CII. In its pre-Budget 2017 memorandum, the Confederation of Indian Industry (CII) urges Finance Minister Arun Jaitley to also reduce the lock-in period required for term deposits to three years. “Currently, deduction under section 80C is restricted to Rs 150,000. Further, contribution to provident fund has been included in the deduction under section 80C limit. Equity Linked Savings Scheme (ELSS) which is an open-ended equity mutual fund is qualified for deduction under section 80C with lock-in period of three years. Further, dividend and capital gain are tax exempt,” CII notes.
“Limit of deduction under section 80C may be increased to Rs 250,000. A new section should be inserted under Chapter VI-A which provides for deduction of contribution to provident fund from the gross total income in addition to deduction under section 80C. This would encourage investments in other schemes provided in section 80C and increase the liquidity and investments in the country,” CII recommends.
“To make the term deposits at par with ELSS, the lock in period for 80C should be reduced from present five years to three years. To induce long term savings through fixed deposits it is essential to remove the tax arbitrage. Further, this would be revenue neutral as there will be no loss to the revenue,” CII adds.
Union Budget 2017 should also look to increase the monthly transport allowance limit that is exempt from tax, says the industry body. “The transport allowance granted by the employer to the employee to meet his expenditure for the purpose of commuting between the place of his residence and the place of his duty is currently tax exempt up to Rs 1600 per month in terms of Section 10(14) of the Act read with Rule 2BB of the Rules. This exemption limit seems quite nominal considering the ever rising fuel costs and resultant conveyance costs,” it states.
“The exemption limit of Rs 1,600 per month needs to be considerably raised upwards, say to minimum of Rs 5,000 per month to bring it in line with the rising conveyance costs,” it says.