New Delhi: Seeking to boost household savings, the Finance Ministry is considering to hike the exemption limit for investments by individuals in financial instruments to Rs 2.5 lakh from Rs 1.5 lakh currently.
Bankers and insurers on Tuesday made a strong pitch in pre-budget consultation with finance minister Arun Jaitley to hike the tax exemption limit to Rs 2.5 lakh from Rs 1.5 lakh per annum to encourage household savings.
Presently the investments and expenditures up to a combined limit of Rs 1.5 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 2016-17 will be presented by Finance Minister Arun Jaitley in the Lok Sabha on February 29.
There have been demands from bankers and insurers in pre-budget consultation with finance minister Arun Jaitley on Tuesday to hike the tax exemption limit to Rs 2.5 lakh from Rs 1.5 lakh per annum to encourage household savings.
Bankers said the ceiling should be enhanced, especially at a time when real interest rates (net of inflation) had turned positive after several years.
Under the current rules, the government allows deduction of up to Rs 1.5 lakh for investment in various savings instruments such as fixed deposits with a tenure of five years or more, provident fund, PPF and life insurance schemes.
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 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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