Monday, 7 February 2011

Budget Expectation- Maximum limit of tax saving may be increased

All are looking eagerly for the forthcoming budget -2011 which would be presented in the Parliament at the end of February, 2011. There is an expectation for the hike of tax saving investment limit in the coming budget. The Telegraph reported so.

At present the maximum limit of exemption of income under section 80C is Rs. 100000, which includes investments in EPF, PPF, NSC, LIC, and ELSS, 5 years tax saving FDRs, Payment of Tuition fee, Repayment of the principal amount of housing loan etc., and another Rs. 20000 under section 80CCF for the deposit in the infrastructure bonds of selected companies. This may be increased to Rs. 140000 to 150000 in the budget 2011.

The Top officials said  that the government would encourage people to invest in infrastructure bonds and pension and insurance products as these generate long-term savings and can be used to fund the country’s growing need for highways, ports, airports and power plants etc.

Investment under section 80C may be raised from Rs. 100000 to Rs. 120000 and investment in infrastructure bond under section 80 CCF may be raised from Rs. 20000 to 30000. If the expectations are come in to reality a tax payer would not pay tax for an income around Rs. 300000 in a year.

The Direct Tax Code which will be implemented from April, 2012 also will be continued with Long term tax saving schemes. It may be included PF, PPF, infrastructure bonds and pension schemes and also may be following Exempt- Exempt-Taxed (EET) or Exempt- Exempt-Exempt Method in Tax saving Schemes. When the saving is done it will be exempted from Tax and when the interest is due also will be exempted and when the final withdrawal of money it will be taxed or exempted as per the EET or EEE strategy.

Let us hope that the increase in Tax saving limit and an increase in nil tax limit also will be there in the coming budget.

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