Budget 2021 Expectations for Income Tax: As the preparations for Union Budget 2021-22 are in the final stage, it is expected that the scope of the tax-saving investments may be increased, if not the limit.
Currently, the limit of tax benefits on tax-saving investments u/s 80C of the Income Tax Act is Rs 1.5 lakh, which includes a number of things.
Union Budget 2021-22 Expectations for Income Tax: As the preparations for Union Budget 2021-22 are in the final stage, it is expected that the scope of the tax-saving investments may be increased, if not the limit.
Currently, the limit of tax benefits on tax-saving investments u/s 80C of the Income Tax Act is Rs 1.5 lakh, which includes a number of things – including premium paid for life insurance, ULIP, contributions to PPF, Sukanya Samriddhi Yojana, investments in ELSS, NSC, long-term FD as well as payment of home loan principal, tuition fees for children’s education etc.
Too many options u/s 80C often confuse people on setting priority to avail tax benefits.
“Budget 2021 should announce a separate deduction for term insurance premiums to incentivise consumers to buy adequate life insurance covers. Term insurance policies allow consumers to buy large life covers at much lower premiums than other insurance products,” says Naveen Kukreja, CEO& Co-founder, Paisabazaar.com.
Tax benefits on NPS
It is also expected that the benefits available to certain categories of investors on NPS (National Pension System) investments would be extended to others and also the benefits available to NPS to be extended to other investments too.
“As a step towards improving post-retirement security among the salaried class, the tax deduction available through Section 80CCD(1B) should also be extended to investments made in pension plans offered by life insurance companies and mutual fund houses. The inclusion of these products will enhance consumer choice and bring tax parity among the pension products,” said Kukreja.
“The NPS Tier-II Taxsaver Scheme announced in Budget 2020 for central government employees has a lock-in period of just 3 years and a fixed asset allocation of 10-25 per cent for equities and the rest in debt instruments. This year’s Budget should open this tax saving scheme to self-employed and salaried individuals working with State Governments and private sector. This will offer them an option of saving taxes under Section 80C by investing in a debt-oriented instrument, especially during overvalued equity markets,” he added.
Tax benefits on affordable housing
To provide incentive to affordable housing, it is also expected that the additional tax benefits given on purchasing such houses on loan would be continued.
“Housing industry has a multiplier effect on jobs and core industries of the economy, and promoting affordable housing has been one of the key policy goals of this government. Hence, Budget 2021 should boost demand in the affordable housing segment by making Section 80EEA a permanent feature or at least extending it to the next financial year. Section 80EEA offers an additional deduction of Rs 1.5 lakh on home loan interest repayment to first time home buyers for purchasing housing units of stamp duty value of up to Rs 45 lakh. This deduction is over and above the Rs 2 lakh deduction on home loan interest repayment under Section 24b,” said Kukreja.