Will the FM raise the Section 80C deduction limit?

Household financial savings are the largest contributor of overall savings in India. The money that households put in financial instruments fuels economic growth – unless economies have the capacity to maintain foreign borrowings. In that sense household savings are critical to sustain and keep up growth.

Our PM has a laid out a vision in the ‘Make in India’ campaign to boost domestic growth and production. With the Budget detailing on in full swing – it is likely the government will take some measures to boost household savings. A step in that direction is increasing the deduction limit under section 80C. This limit was enhanced last year from Rs 1,00,000 to Rs 1,50,000. This year the RBI governor has come out in full support of increasing the deduction further. The governor is concerned regarding the falling rate of national savings.

While the governor has been supporting the government by cutting interest rates – making it easier to borrow and therefore encouraging investment in production, it is to be seen if the Finance Minister now makes the quid pro quo move and increases the 80C Deduction limit. This requires our FM to carefully balance the expected fall in tax collections against the savings growth from the enhanced limit and make the maximum benefit out of these two to grow the economy.

Section 80C has indeed become very crowded with a plethora of investments and expenses that are allowed to be claimed. An increase in Section 80C limit is always good news for the common tax payer!

Let us know what you think with your comments below.


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