Has the Section 80C deduction limit been raised in previous Union Budgets?
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Yes, in the 2014 Union Budget, this deduction limit was increased from Rs. 1 lakhs to Rs. 1.5 lakhs.
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Will Section 80C Limit Rise in Budget 2025?
By Bajaj Broking Team
January 29, 2025
4 mins read
Budget
If you are a salaried individual, you might be curious whether the Union Budget 2025 will adjust the deduction limit under Section 80C. Guess what? You’re not alone, as millions of taxpayers across India are asking the same question. The Section 80C deduction limit has remained unchanged since it was last raised in 2014.
So, will the government increase it in the 2025 Budget? Some experts speculate that the government might raise the limit from the current ₹1.5 lakh to ₹3 lakh, considering inflation trends. However, other experts remain less optimistic.
One reason for skepticism is that Section 80C deductions are applicable only under the old tax regime, not the new one. The new tax regime offers lower tax rates but eliminates exemptions and deductions like those under Section 80C. As such, it might be unlikely for the government to allow these deductions in the new regime.
Additionally, the government may explore other avenues to reduce the tax burden on the middle class instead of revising the Section 80C limit. That said, introducing Section 80C benefits under the new regime could be a strategy to appeal to salaried taxpayers.
Ultimately, there are arguments both for and against raising the deduction limit under Section 80C. Read on to understand what this deduction entails and how the government may approach this decision.
On Budget Day, visit Bajaj Broking’s website, where we will simplify the tax announcements from the Union Budget 2025 in easy-to-understand language. After all, Bajaj Broking believes #BudgetSimpleHai!
Visit our website or follow our social handles for live updates on the Union Budget. Read in-depth reports, watch videos, and understand what's in store.
Kyunki Bajaj Broking ke saath, #BudgetSimpleHai!
Introduction to Section 80C and its Current Limit
Section 80C is one of the most important sections of the Income Tax Act. Under this section, salaried individuals can make certain investments or pay some expenses and claim tax deductions for it. To simply explain, suppose you make an investment of ₹50,000 in an instrument allowed under Section 80C, your taxable income will be reduced to the extent of ₹50,000. If you fall under the 20% tax bracket, your tax liability will be reduced by ₹10,000 (₹50,000 * 20%).
You may ask what kind of investments and expenditures are allowed under this section. The following investments and expenditures are permitted.
Premiums paid on account of life insurance policies.
Investments in your public provident fund (PPF) account and national savings certificates (NSC).
Investments in equity-linked savings schemes (ELSS).
If the principal amount of a housing loan is being repaid, such an amount is exempt.
Premiums paid for unit-linked insurance plans (ULIPs).
Investments in tax-saving fixed deposits with a lock-in period of five years at least.
Put together for all the options listed above, a taxpayer can get a deduction of Rs. 1.5 lakhs. Suppose you have invested Rs. 1.5 lakhs in PPF alone, you can get the entire amount tax deducted. Besides, you can invest in other options like ELSS, but you won’t get any tax deduction because you’ve already got a deduction for Rs. 1.5 lakhs. Having learnt what the deduction limit is under this section, let’s delve deeper into this topic.
Additional Read: Budget 2025: Change in Income Tax Slabs?
Historical Changes in Section 80C Deduction Limits
Section 80C came into being in 2005. Prior to 2005, such deductions and exemptions were available under Section 88.
In 2005, the maximum deduction allowed under Section 80C was Rs. 1 lakh.
Then, in 2014, when Mr. Arun Jaitley was the Finance Minister, this limit was increased to Rs. 1.5 lakhs.
However, since 2014, the deduction limit under Section 80C has not been increased.
This is why many experts think that this budget should increase the deduction limit under this section.
Expectations and Speculations for Union Budget 2025
As per recent reports, there’s speculation that the 2025 budget might increase the Section 80C deduction limit from Rs. 1.5 lakhs to Rs. 3 lakhs, offering significant relief to taxpayers.
As this deduction limit has not been increased in the last 10 years, the government may do so to account for the impact of inflation.
However, there are experts who think that the government is unlikely to increase the deduction limit under this section. This is because all these deductions are available under the old tax regime and not under the new tax regime. And, the government wants people to move away from the old regime.
Additional Read: Indian Union Budget Highlights: Direct Taxes
Conclusion
If you are a middle-class taxpayer, this budget could bring meaningful changes depending on the government’s approach to tax relief . In case the budget increases the deduction limit under Section 80C, it will be the first time this will happen in 10 years.
If that happens, you should aim to invest your tax savings wisely. You can open a demat account and start investing in equities or mutual funds. However, if the government doesn’t increase the deduction under Section 80C, it may still offer you relief through other tax-related measures.
Watch this space because Bajaj Broking will decode the budget and its impact on the Indian stock market in the simplest possible language. Meanwhile, you can read expectations from Union Budget 2025 here and key areas of the budget here.
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Frequently Asked Questions
What factors typically influence changes in Section 80C deduction limits?
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The existing tax burden of taxpayers and inflation are factors that typically influence changes in the deduction limit under this section.
What are the expectations from taxpayers and financial experts regarding the upcoming Union Budget 2025?
- Answer Field
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Certain experts expect the government to increase the deduction limit under Section 80C in this budget.
How might an increase in the Section 80C deduction limit impact my tax savings?
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If this deduction limit is increased, salaried individuals will be able to save their tax. Hence, they will have more tax savings than they have currently.
Are there alternative tax-saving avenues taxpayers should consider if the Section 80C limit remains unchanged?
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This can vary from one taxpayer to another. However, taxpayers can opt for the new tax regime. Under this, they don’t have to pay any tax if their annual income is equal to or less than Rs. 7 lakhs.
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