Budget 2023: ‘Increase section 80C limit to Rs 2.5 lakh, raise PPF investment limit to Rs 3 lakh’

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The deduction limit under section 80C of the Income-tax Act, 1961, should be increased from the existing Rs 1.5 lakh to Rs 2.5 lakh in Budget 2023, the Institute of Chartered Accountants of India (ICAI) suggested in its Pre-Budget Memorandum 2023. A hike in the deduction limit of section 80C would “provide savings opportunities to the public at large,” ICAI mentioned.
Increasing the limit of section 80C has been a long-standing demand of the industry. It was last hiked from Rs 1 lakh to Rs 1.5 lakh in the financial year 2014-15. Do note that deduction under section 80C is only available to those who opt for the old tax regime while filing the income tax return.
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Raise PPF investment limit in Budget 2023

ICAI has also suggested raising the annual limit for the contribution to Public Provident Fund (PPF) from the current Rs 1.5 lakh to Rs 3 lakh in Budget 2023.

Mentioning the rationale behind the demand for higher the maximum contribution limit under PPF, ICAI said, “PPF is used as a means of savings by entrepreneurs and professionals. While the assessees in employment have the compulsion of saving 12 per cent of their salary (with matching contribution from employers), the only safe and tax efficient saving option available for self.”

“Further, the present limit of Rs 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,” it added.
Full deduction for health insurance premium under section 80D, not as a medical expense
Further, it has suggested that the “full deduction for health insurance premium paid under Section 80D may be allowed and not to tag it with a deduction for medical expense. Apart from the 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 the public health sector to cater to the needs of the taxpayers by providing efficient hygienic and timely medical treatment,” it added.

ICAI has asked the finance ministry to increase the limit for deduction under section 80DDB for expenses incurred on the treatment of certain chronic diseases.

Changes in section 80CCC

“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 is to amend this section to the effect that in cases where the deduction is not claimed under this section, only the appreciation component of the investment will be subjected to tax. Even if a 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 suggested.

Deduction for travel insurance, home insurance, personal accident covers

ICAI also asked for a separate deduction for payments relating to travel insurance, home insurance, or personal accident insurance policy. At present, a deduction under Section 80C is available for LIC and a deduction under section 80D is available for health insurance premiums. “Deduction for insurance premium relating to travel, home, etc. will boost the policyholders to secure their assets like car, home, etc. and also to avail personal accident cover,” ICAI added.

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