Budget 2018: The common man can look forward to some tax breaks in the upcoming Union Budget 2018, as the government is likely to offer taxpayers some relief by raising the limit for income tax deduction to Rs 2.5 lakh, from Rs 2 lakh currently.
Budget 2018: The common man can look forward to some tax breaks in the upcoming Union Budget 2018, as the government is likely to offer taxpayers some relief by raising the limit for income tax deduction to Rs 2.5 lakh, from Rs 2 lakh currently. According to a report in the Economic Times, the extra deduction will be available only on investments made in government infrastructure projects. “Discussions are on to give relief to taxpayers in the form of higher tax deduction. The higher deduction will be for investing in infrastructure projects in the form of bonds or through equity-linked savings schemes,” the newspaper quoted sources as saying. However, these investment routes are likely to have a lock-in period.
At present, taxpayers get relief under 80C, 80CC and 80 CCD of the Income Tax Act. Government officials had earlier told FE Online that the Union Budget for 2018-19, to be presented on February 1, may also enhance the limit for tax-free investments and expenses under section 80C of the Income Tax Act to Rs 2 lakh from Rs 1.5 lakh. These investments include those made in provident fund (PF) and public provident fund (PPF) schemes, life insurance premiums, equity-linked savings schemes and five-year bank deposits.
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The expenses include tuition fees and the principal repayment on home loans. There is a tax break for up to Rs 50,000 for investments made in the National Pension System (NPS) under section 80CCD, but that quota is unlikely to be increased, sources had said. However, there is a chance that withdrawals from the NPS on maturity may not be taxed to the extent that they are now. Currently, 40% of the corpus on maturity is tax-exempt while 20% is taxed at the marginal rate. For the remaining corpus of 40%, individuals need to buy annuities from life insurers.
In the Union Budget for 2017-18, finance minister Arun Jaitley had left the income slabs unchanged but had provided marginal relief to the small taxpayer by reducing the rate to 5% from 10% for individuals with an annual income of between Rs 2.5 lakh and Rs 5 lakh.
The last time the limit under Section 80 C limit was raised was in the Budget for 2014-15 when it was upped to Rs 1.5 lakh from Rs 1 lakh. While raising the ceiling for income-tax exemption could result in some loss to the exchequer, tax experts believe the government could try and recover some of this from higher investments in existing and new new tax-saving investment schemes.