Union Budget 2020: Industry body FICCI or Federation of Indian Chambers of Commerce & Industry has called for an increase in the existing limit on income tax deduction available under Section 80C of the Income Tax Act. In a statement listing its pre-Budget recommendations for the Finance Minister, FICCI has suggested increasing the overall deduction limit under Section 80C to at least Rs 3 lakh to "boost further investment and increase tax savings" for individual taxpayers. Currently, individual assessees can claim income tax deduction up to Rs 1.5 lakh in a financial year under Section 80C of the Income Tax Act using investments as life insurance policies, tax-saving mutual funds and fixed deposits, provident fund, National Pension System (NPS) and unit-linked insurance plans (ULIPs).
Explaining the rationale behind its recommendation to enhance the Section 80C limit, FICCI said life insurance and pensions are the main segments of the financial services that address the needs of individuals in the long term. "It would be equally desirable to have many more such tax-exempt investment avenues to mobilize funds for infrastructural and overall economic development," it said in its pre-Budget recommendations.
"There must be a clear distinction between long-term and short-term savings. So far there has not been any significant support in tax policy to actively encourage long-term savings which is very much needed," according to FICCI.
Section 80C has over the years helped the government raise funds as well as individuals to save taxes against their investments. However, with too many investments clubbed into the existing overall limit of Rs 1.5 lakh a year, individuals sometimes are discouraged from making further investments, according to FICCI.
Finance Minister Nirmala Sitharaman will present the first full-year Union Budget of Prime Minister Narendra Modi's government in Parliament on February 1.