Tax Relief Under Section 80C

Finance Ministry may double tax exemption limit under 80C to ₹2 lakh-Hindu Business Line

NEW DELHI, JUNE 30:  

Seeking to boost household savings, the Finance Ministry is considering doubling the exemption limit for investments by individuals in financial instruments to ₹2 lakh.

Currently, the investments and expenditures up to a combined limit of ₹1 lakh get exemptions under Sections 80C, 80CC and 80 CCC of the Income-Tax Act.

Sources said the revenue department is assessing the burden on the exchequer in case of increase in the benefit limit. The announcement is expected in the Budget.

The Budget for 2014-15 will be presented by Finance Minister Arun Jaitley in the Lok Sabha on July 10.

There have been demands from bankers and insurers to hike the tax exemption limit from ₹1 lakh per annum to encourage household savings.

The savings rate has come down from over 38 per cent of GDP in 2008 to 30 per cent in 2012-13.

The hike in the exemption limit, sources said, would provide much needed relief to the salary earners who are reeling under the impact of high inflation.

The Direct Taxes Code (DTC) too has recommended that the combined ceiling for investments and expenditures be raised to ₹1.5 lakh per annum.

The financial instruments which enjoy exemption include life insurance premium, public provident fund, employees provident fund, National Savings Certificates, repayment of capital on home loan, equity linked saving schemes sold by mutual funds and bank FDs of five year maturity.

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Tax Exemption On Bank Deposits

AIBEA seeks hike in tax exemption on bank deposit interest to Rs 25K-Zee News

Vadodara: Bank employees body AIBEA has demanded an increase in the exemption of tax on interest earned on bank deposits to Rs 25,000 from Rs 10,000 at present from the government in its maiden Budget next month.

The limit of Rs 10,000 was fixed about a decade ago and hence needs to be revised, because bank deposits are the only source of income for senior citizens and retired employees, All India Bank Employees' Association (AIBEA) General Secretary C H Venkatachalam said Thursday.

AIBEA has made the suggestion to Union Finance Minister Arun Jaitley for the Budget, he said.

The AIBEA has also opposed moves to merge nationalised Banks. It has also suggested that the SBI's associates or subsidiary banks be freed from the SBI and made completely independent banks, he said.

"Public sector banks have played a very important role in the country's development and all of them survived even when the largest banks in the USA and elsewhere collapsed during the global recession of 2008.

"Therefore, merger of public sector banks into a single bank is not in national interest, since people prefer to park their hard earned money in public sector banks, because they know that their money is safe in public sector banks," the AIBEA leader said.

"Government policy should aim at promoting savings and investments by parking funds in public sector banks. Hence the government should persuade public sector banks to increase the interest rate on bank accounts to around 5.05 percent," the AIBEA leader said.

Other suggestions and proposals made by AIBEA include bringing all private sector banks under the public sector, besides an assurance that government stake holdings in public sector banks would not be reduced below 51 percent.

Instead, the AIBEA has suggested that the government should ensure complete hold over these banks by controlling 100 percent of their equity.

AIBEA has asked that floating of asset reconstruction companies as a tool to reduce NPAs should be discouraged, and these NPAs should be actually recovered from corporate defaulters.

Auction of NPAs should also be stopped, because it involves huge write-offs which ultimately end up resulting in heavy losses to banks, he said.

The AIBEA has demanded that the Reserve Bank of India (RBI) should ban corporate houses borrow under the overseas commercial bodies (OCB) route because they tend to park such borrowings with domestic banks, merely to earn a higher rate of interest, instead of actually deploying the money to implement productive projects.

The RBI policy of giving licences to private sector corporate houses to open banks should be discouraged and such a licencing policy should be discontinued, Venkatachalam said.