Budget 2023 Section 80C limit increase expectation: Individual investors as well as finance and tax experts are expecting the Government to raise the deduction limit under Section 80C from Rs 1.5 lakh/year to at least Rs 2 lakh or Rs 2.5 lakh in Budget 2023, which will be presented on February 1. The hike, if announced, will not only help individual taxpayers to reduce their annual tax outgo but also boost savings and investments in schemes that qualify for deduction under Section 80C.
Experts are also expecting the Government to revise tax slabs and rates in Budget 2023 for the benefit of taxpayers.
“There could be a reduction in the top tax bracket from 30% to 25% and/or an increase in the number of threshold slabs. Additionally, it is possible that the investment limit under the Section 80(C) may be raised from 1.5 lakhs to 2.5 lakhs, which will be well-received by individual taxpayers. A boost to the capital markets could arise from an increase in the 80C limit in the form of more positive cash flows to equity-linked savings schemes (ELSS) of mutual funds,” says Abhijit Bhave, CEO of Fisdom private wealth.
Deloitte Survey
In a Pre-Budget 2023 survey by Deloitte, the majority of 181 respondents across 10 industries said they were expecting “changes in personal taxation in the form of more tax exemptions and increasing deduction limits such as the interest deduction for house loans, to be most effective for individuals, which would give them more purchasing power and thereby increase demand (consumer) in the market.”
Around 60% of respondents said they were expecting enhancements to the deduction limits in personal taxes.
Time to expand the scope of Section 80C
Though large tax-related reliefs are not expected from the upcoming budget, experts are of the view that Budget 2023 should take steps to expand the scope and limits defined under Section 80C.
“We do not expect larger-than-life sops and subsidies being announced but a well-calibrated sectoral allocation instead,” Anand Dalmia, Co-founder & CBO of Fisdom.
“Developments in the income tax rules will be largely aligned towards the long-standing objective of widening the tax net and ensuring that the benefits of complying outweigh the cost for the general public. With per capita income rising and the need for penetration across product categories qualifying under section 80C, there is an almost urgent need to expand the scope as well as limits assigned to the section. While the same has been on budget wishlists for the longest time, the moment seems opportune to address it,” he adds.
Also Read: How Budget 2023 can help salaried employees
What the insurance industry expects
Experts in the insurance industry are also expecting the Budget 2023 to expand the scope under Section 80C.
Subhrajit Mukhopadhyay, Executive Director of Edelweiss Tokio Life Insurance, says that the Budget should consider creating a separate section for tax deduction on premiums paid towards life insurance.
“Life insurance is a long-term solution, unlike other financial products which have a shorter investment horizon and are covered under the 80C provision. Currently, all financial purchases are clubbed under the same IT deduction section (80C) capped at Rs. 1,50,000. We expect the budget to consider creating a separate section for tax deduction on premiums paid towards life insurance. This will enable effective segregation of customer’s funds into long-term and short-term kitties,” says Mukhopadhyay.
Satishwar B, MD & CEO of Aegon Life Insurance says that pension/annuity products should be made tax-free in the hands of policyholders. “Pension/annuity proceeds should be made tax-free in the hands of policyholders, or a deduction for the principal component should be allowed. Further, an aggregate deduction of up to Rs 1.75 lakh, for the premiums paid for life and health can be introduced to nurture the eco-system of insurers, insurtechs and consumers.”