Jan 11, 2017 09:13 PM IST IST | Source: Moneycontrol.com

Budget 2017: FM seen upping tax-free threshold, 80C exemption limit

The government is working on the assumption that in times of cash crunch, the best way to achieve higher spending is by raising disposable income through tax breaks.

After GST, the focus in the budget will be on direct tax reforms. Expect big announcements in the income tax slabs and rates. For instance, there is a possibility of raising the income tax exemption limit substantially from Rs 2.5 lakh per annum currently.

The government is working on the assumption that in times of cash crunch, the best way to achieve higher spending is by raising disposable income through tax breaks.

Finance Minister Arun Jaitley may also raise tax breaks offered on money parked in a pool of savings instruments including bank fixed deposits, insurance premium and mutual funds from Rs 150,000 to Rs 200,000 a year under the popular "Section 80C" scheme.

The move is aimed at encouraging people to move their extra funds into the banking and the financial system, instead of stocking up cash.

The move will also act as an inducement to move funds from holding cash into financial instruments following the demonetisation of old Rs 500 and Rs 1000.

Current rules allow individuals to claim tax deductions up to Rs 150,000 under Section 80C of the Income Tax Act for savings in products like provident fund, national savings certificates (NSC), repayment of principal amount of home loans, children's tuition fee, public provident fund, specific mutual funds and life insurance premium.
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