Image Source : PTI/FILE PHOTO Union Finance Minister Nirmala Sitharaman chairs a meeting on pre-budget consultation with states and union territories (with legislature) for the forthcoming Union Budget 2025-26.
As the Union Budget 2025 nears, taxpayers are eagerly awaiting possible changes in the income tax regime. The main focus is the long-standing demand for raising the deduction limit under Section 80C of the Income Tax Act, with tax liability capped at Rs 1.5 lakh from 2014. Provision is the cornerstone for taxpayers under the old tax system, who help individuals and Hindu Undivided Families (HUFs) save taxes through specific investments and expenses.
What is Section 80C?
Section 80C allows taxpayers to deduct Rs 1.5 lakh per financial year on investments and qualifying expenditure, thereby reducing their taxable income. Here is a breakdown of the relevant categories.
Investments:
Equity Linked Saving Schemes (ELSS)
Public Provident Fund (PPF)
National Savings Certificate (NSC)
Voluntary contributions to Employee Provident Fund (EPF)
Sukanya Samriddhi Yojana
Senior Citizen Savings Scheme (SCSS)
Five-year tax-saving fixed deposits
Unit Linked Insurance Plans (ULIPs)
Expenses:
Tuition fees for up to two children
Home loan principal repayments
Life insurance premiums
Contributions to pension schemes like the National Pension System (NPS)
Why does the increase in the section 80C limit matter?
The limit of Rs 1.5 lakh under Section 80C has remained unchanged for over a decade, despite rising inflation and cost of living. Experts said a review of this requirement is needed to encourage greater savings and investment in line with economic realities.
Rajiv Gupta, President of PB Fintech, remarked, “The current limit often runs out quickly when investments such as PPF and home loan repayments are considered. A separate exemption category for term insurance would incentivise families to secure adequate life coverage.”
Will the Budget 2025 bring changes?
Though no official confirmation has been made, increasing the Section 80C limit is one of the most pressing demands from both taxpayers and industry experts. Such a move would not only alleviate financial pressure on individuals but also boost investments in instruments that support national savings and economic development.
Maximising benefits before the budget
Until any changes are announced, taxpayers should focus on making timely investments and accurately filing their Income Tax Returns (ITR). Supporting documents, such as investment proofs, are crucial for ensuring smooth deduction claims.
As Finance Minister Nirmala Sitharaman prepares to present the Union Budget 2025, the nation awaits reforms that strike a balance between fiscal responsibility and individual relief. An increase in the Section 80C limit could be a pivotal step toward achieving this balance.
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