Union Budget 2021 expectations: The Institute of Chartered Accountants of India (ICAI) has recommended the government to increase the Public Provident Fund (PPF) contribution limit to Rs 3 lakh.
Here are the suggestions for PPF, Section 80C by ICAI. Representational image/Pixabay
Union Budget 2021 expectations: The Institute of Chartered Accountants of India (ICAI) has recommended the government to increase the Public Provident Fund (PPF) contribution limit to Rs 3 lakh. The recommendation has been made by the premier institute for chartered accountants in its pre-Budget memorandum.
PPF is an important financial instrument for tax-saving and investment for the self-employed individuals, entrepreneurs and professionals. In contrast to employed individuals, who also have the option of contributing to Employees Provident Fund (EPF) apart from PPF, self-employed assessees have only one tax-efficient saving option. To bring such assessees at par with employed individuals, it is necessary to increase the PPF contribution limit to Rs 3 lakh.
Currently, the maximum amount an assessee can invest in PPF per annum is Rs 1.5 lakh.
“PPF is used as a means of savings by entrepreneurs and professionals. While the assessees in employment have the compulsion of saving 12% of their salary (with matching contribution from employers), the only safe and tax efficient saving option available for self-employed assessees is PPF. Hence, the suggestion to increase the ceiling of PPF contribution to Rs.3 lakhs,” said the ICAI Budget memorandum.
According to ICAI, increasing the PPF contribution limit may boost domestic savings and have an anti-inflationary impact.
“This may also boost the domestic savings as a percentage of GDP and will have an anti-inflationary impact. Further, the present limit of INR. 1,50,000 has not been increased for several years and requires reconsideration. The revised monetary limit will help in increasing the savings of individuals and is necessary keeping in view the rate of inflation,” ICAI said.
Key suggestions for Budget 2021
The ICAI has made the following suggestions for changes in PPF contribution limit and deductions under Section 80 C and 80D.
The annual limit for contribution to PPF be increased to Rs. 3 lakhs from the present ceiling of Rs. 1.5 lakhs.
The maximum limit for deduction under section 80CCF may be increased from Rs.1.5 lakhs to Rs.3 lakhs.
Deductions under Section 80D: Full deduction for health insurance premium paid u/s.80D may be allowed and not to tag it with deduction for medical expense. Apart from deduction for health insurance premium, a separate deduction for medical expenses incurred should be made available. The justification for such separate deduction is lack of social security cover and the inability of public health sector to cater to the needs of the tax payers by providing efficient hygienic and timely medical treatment.
The limit for deduction under section 80DDB for expenses incurred on the treatment of certain chronic diseases may be increased.
Changes in Section 80CCC: ICAI said that as per section 80CCC, if any contribution is made by the assessee to a pension fund and deduction is claimed under that section, all withdrawals from the scheme by the assessee (including the principal amount) are subjected to tax. “This is causing hardship in respect of those assessees who have simply made contributions to this scheme and have not claimed any deductions. Hence, the suggestion to amend this section to the effect that in cases where deduction is not claimed under this section, only the appreciation component of the investment will be subjected to tax. Even if deduction is claimed, only the amount of deduction claimed should be added to the income at the time of withdrawal from the scheme and not the entire maturity proceeds. Of course, any appreciation over the principal invested can also be taxed as capital gain,” ICAI said.
Increase 80C limit to Rs 2.5 lakh: “The quantum of deduction under section 80C be increased from Rs 1,50,000 to Rs 2,50,000 to provide savings opportunities to public at large,” ICAI said.