Budget 2024: Will Deduction of Section 80C under Old Tax Regime be increased by Government?

Many taxpayers chose the Section 80C benefit as their primary tax-saving option. Individuals who choose the old tax regime can deduct up to Rs 1.5 lakh under Section 80C of the Income Tax Act of 1961. Those who choose the new tax regime are not eligible for this deduction.

The then-finance minister, Arun Jaitley during his term has hiked the 80C benefit limit to Rs. 1.5 lakh per year in 2014. The amendment was one of the primary relief measures implemented by the government in its first budget. However, the 80C limits have not been adjusted since then. This year marks a decade since the last increase, in 2014.

Every year, many taxpayers hope that the Finance Minister will increase the Section 80C limit in the Union Budget 2024.

The limit of 80C has not increased in line with many people’s income and expenses. Because of this gap, many taxpayers ultimately use their whole 80C limit.

What is the benefit of Section 80C Limit?

The maximum tax deduction allowed under section 80C is Rs. 1.5 lakh. However, taxpayers are free to invest in one or more savings vehicles.

Individuals and Hindu Undivided Families (HUFs) are the only ones eligible for the Section 80C deduction. A deduction can be claimed by taxpayers for their investments made in specified savings plans or for payments towards specific investments and expenses covered under the category of 80C.

Why should the limit of Section 80C increased?

A taxable income of an individual is determined by deducting the amount of his eligible section 80C deduction from his gross total income. As a result, any change in the section 80C deduction cap has a direct impact on an individual’s taxable income and, consequently, their tax liability.

For many, expenses and salaries have risen, but the Section 80C benefit has not kept up. As a result, many people reach their limit very rapidly. That is why increasing the limit of Section 80C is always the primary expectation of taxpayers prior to the annual budget and it should be considered by the government.

The cost of living has skyrocketed, worsened by the pandemic’s negative consequences. An increase in the Section 80C cap will allow individuals to boost their savings, which is essential given the present pace of inflation.

It will help in the following:

• Reducing the tax burden of an individual.
• It allows individuals to save for financial goals such as retirement, children’s education, and so on.
• Facilitates the purchasing of a home.
• Provide a sense of security.

How to claim Deduction under Section 80C?

To be eligible for the Section 80C deduction from gross taxable income, an individual must invest in permitted expenditures. Once a person has entered all of their income and calculated their gross taxable income, they can claim the deduction on the ITR form.

The net taxable income is calculated by subtracting a certain amount from the gross income. The liability of tax is calculated on the net taxable income.