Will the section 80C deduction limit see an increase?

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Santanu Sengupta, the chief India economist at the Wall Street bank, highlighted a strong focus on creating jobs through labor-intensive manufacturing, increasing credit for micro, small, and medium enterprises (MSMEs), maintaining a commitment to services exports by expanding global capability centers, and bolstering the domestic food supply chain.

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Sunil David, Chair, Intelligent Networks, IET Future Tech Panel, expectation from coming Budget:

Infrastructure Development Pace: The pace of rural telecom infrastructure development needs to be accelerated to address connectivity gaps and bridge the digital divide.

Skill Development Gap: The transition to advanced technologies like 5G requires upskilling and reskilling the workforce to meet the evolving demands of the sector.

Regulatory Reforms Progress: The extent of progress made in simplifying regulations and licensing procedures remains unclear, and further efforts may be needed to improve the ease of doing business in the sector.

Railway industry urges the central government to continue capital expenditure in the upcoming Budget on July 23.
Focus on prioritizing the creation of energy, mineral, and cement corridors.

Former rail officials and industry experts emphasize the need for the government to shift focus to safety.

Vivek Lohia, MD of Jupiter Wagons, highlights the importance of timely creation of economic corridors for enhanced connectivity and economic growth through Indian Railways.

PHD Chamber of Commerce and Industry advocates for increased capex spending on better technology.
Technologies include rail-road connectivity, IoT, automation, blockchain, cloud computing, AI, and robotics to improve logistics development.

Anurag Gupta from Deloitte India stresses the need for Indian Railways to focus on developing economic corridors to increase cargo carrying market share above 30 percent.

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As the Union Budget 2024 approaches, the Indian cement industry is anticipating a substantial increase in budget allocations for housing and infrastructure projects, which jointly account for more than 80 percent of cement demand in India.

The industry is hopeful of significant investments in highways, roads, bridges, and urban development. With ambitious projects like the Bharatmala and Sagarmala initiatives, the sector sees a vast opportunity for growth if these projects receive the necessary funding.

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Mukul Goyal, Co-Founder of Stratefix Consulting:

"We anticipate that the Union Budget 2024 will introduce significant initiatives to assist workforce development and job creation for MSMEs in India. One crucial area is improved skill development. The budget should allocate significant funding for upskilling and reskilling programs, particularly in automation, artificial intelligence, and data analytics. Providing future-ready skills will enhance employability and foster creativity in MSME workforces.

According to the National Skill Development Corporation (NSDC), only 10% of Indian workers receive formal training compared to 60-90% in wealthy nations. Closing this gap should be a primary concern. The government should also offer tax breaks and subsidies to MSMEs investing in staff training and development to promote ongoing learning and adaptability.

Obtaining timely and reasonably priced financing has been a persistent issue for India's MSME sector. We hope the budget will further support programs like the Emergency Credit Line Guarantee Scheme (ECLGS) and the Partial Credit Guarantee Scheme (PCGS) to improve credit availability. The Reserve Bank of India has estimated a credit gap of ₹20 to ₹25 trillion in the MSME sector, highlighting the need for better financing accessibility.

To improve the regulatory environment for MSMEs, it is crucial to implement policies that simplify compliance requirements, reduce paperwork, and expedite approval processes. This would make doing business easier and allow businesses to concentrate on their core competencies. According to the World Bank's Ease of Doing Business report, India is ranked 63rd globally, underscoring the need for further changes.

Equally important is strong support for MSMEs' digital transformation. We expect the budget to include specific funding for initiatives that encourage the adoption of cutting-edge technologies. Providing MSMEs with the tools they need to embrace digitalization will help them reach their full potential and become more competitive internationally."

"While allocations for conditions such as sickle cell anaemia and thalassemia in the previous budgets are commendable, Jindal IVF stresses the need for Budget 2024-25 to broaden its scope. We urge the Government of India to integrate preventive strategies like Preimplantation Genetic Testing (PGT) for genetic disorders into national healthcare frameworks. Additionally, there is a critical need for increased funding towards assisted reproductive technologies, specifically IVF. We also advocate for public-private partnerships to ensure equitable access to essential reproductive treatments, particularly for the lower middle class. Furthermore, we propose tax incentives for private healthcare providers who offer discounted fertility treatments to economically disadvantaged patients. Moreover, we call for comprehensive insurance coverage for fertility treatments, addressing a critical gap in current healthcare policies. This should include coverage for multiple IVF cycles, as success often requires repeated attempts. Importantly, we recommend the implementation of a nationwide awareness campaign to educate the public about fertility issues and available treatments, reducing stigma and encouraging early intervention. Prioritizing these reforms in Budget 2024-25 can significantly enhance healthcare inclusivity and affordability across India, especially in the area of reproductive health and fertility treatments"- Dr. Sheetal Jindal- MBBS, MD OBG, EPHM (IIM Kolkata) Senior Consultant and Medical Director_Director at Medical Genetics Program_Jindal IVF Chandigarh

Abhinav Jain, Co-Founder & CEO, Almonds AI says:

"In the rapidly evolving landscape of technology and innovation, startups are the engines of future economic growth. The upcoming budget presents a critical opportunity to fuel these engines, ensuring we keep pace with global advancements and lead the charge. Removing the debated 'Angel Tax' will significantly propel India's ascent as a global hub of innovation and technology. Smart investments in our tech ecosystem today will shape tomorrow's industries, creating jobs, driving innovation, and securing our position in the global digital economy."

Arjun Ranga, Managing Director, Cycle Pure Agarbathi:

"The upcoming Union Budget will certainly provide the required momentum for the retail and consumer space. We are confident that the government will ensure long-term growth while duly maintaining flexibility within these critical industries. The expectation from the budget is to ensure the National Retail Policy is formulated and create a window for financing specially for retailers and distributors. Organizations can additionally look forward with great interest to leverage the expected digital transformation incentives towards higher efficiency and more customer-centric offering abilities. Overall, we remain optimistic about the budget's impact on the retail and consumer products industry and look forward to working closely with the government to unlock the full potential of such dynamic segments".

Vijai Subramaniam, Chairman and Founder, Royaloak Furniture says:

"For the retail and consumer sectors in Budget 2024, we anticipate a focus on measures that stimulate domestic demand and boost disposable income. Measures like tax breaks for middle-income earners, increased rural infrastructure spending, and a continued push for digitalization in e-commerce could significantly benefit both retailers and consumers.

These initiatives can translate into a more optimistic consumer outlook – potentially leading to increased spending on discretionary items like furniture. Additionally, a focus on rural development can open new markets for furniture retailers like ourselves. We're also hopeful for policies that incentivize investments in the manufacturing sector, as this can strengthen domestic furniture production and create a more competitive market.

Ultimately, a consumer-centric budget that stimulates disposable income will benefit both retailers and consumers. It will encourage responsible spending, drive economic growth, and create a win-win situation for all stakeholders."

Vinay Konanur, Vice President – Emerging Technology, UNext Learning around the budget expectations for the Edtech and Education Sector:

"Technology has made education more accessible, breaking down geographical and linguistic barriers. Today, any individual with internet access can potentially access mainstream education and upskilling programs, regardless of their location or language. However, cost remains a significant challenge for the learners. Reducing GST rates on online learning will make it more affordable, enabling equal access to education and further democratizing knowledge.

With Generative AI shaping the future, it's crucial to make this technology widely available through AI hubs and centers of excellence. This will also support the MSME sector, the economy's backbone, which requires skilled professionals to assist and enable its AI transformation. There is also a growing need to establish national e-learning standards and accreditation processes that will bring order and trust to the industry, enabling sustainable growth and development. By fostering a more inclusive and skilled workforce, we can unlock economic growth and societal progress. Ultimately, democratizing access to education and AI will empower individuals and communities to reach their full potential.”

The upcoming budget may propose reducing taxes on hybrid cars by eliminating the 15% cess on top of the 28% GST, aiming to boost sales and align tax rates with electric vehicles. Read more here

“The salaried class has always kept high expectations from the budget, but the last few budgets have been quite disappointing in terms of opportunities to optimize tax and potential for long term savings with higher returns. Few asks could include raising the basic exemption slab to at least 5 lacs and simplifying the tax rates to 10%, 20% and maximum 30% along with eliminating the surcharge and cess. Sec. 80C limits could be enhanced to at least 3 lacs from the current 1.5 lacs. Interest limits on housing loans and principal repayments could be enhanced further. Income Tax Returns could be simplified for Employees who have no other source of income other than salary, the submission by Employer along with TDS as applicable must be considered as auto filing of returns.”

Ravi Kabra, Co-Founder of Skippi, says:

"I believe the forthcoming budget holds immense potential to catalyze growth and innovation in India's FMCG sector. Our industry faces several challenges that require thoughtful policy interventions to overcome.

Firstly, the current GST structure imposes significant burdens, particularly on essential FMCG products, particularly through potential reductions in GST rates for essential products currently burdened by high 18% taxes. Infrastructure development, especially for cold chain facilities and warehousing, is crucial to accommodate the growth in beverages and frozen goods. Emphasis on research and development, incentivizing innovation in eco-friendly packaging and natural ingredients, aims to enhance consumer health and industry expansion. Digitalization investments are expected to improve e-commerce infrastructure, benefiting small to medium-sized retailers with tax incentives and promoting rural market accessibility. Efforts to streamline GST processes, simplify licensing, and enhance export facilitation underscore a proactive approach to support FMCG startups and established brands alike. Overall, the budget aims to alleviate financial pressures, stimulate innovation, and bolster market competitiveness through strategic fiscal policies and infrastructure enhancements. Creating cluster programs would simplify operations for FMCG manufacturers by allowing a hub with subsidised resources (such as energy and land) to grow a particular product category.

Moreover, business comfort can be increased by making it simpler for people to obtain financing through banks and NBFCs at cheaper, subsidised rates. These steps would be extremely helpful in promoting growth and sustainability in the FMCG industry, given the competitive margins in the industry."

“We urge the government to address the current inverted tax structure within the Goods and Services Tax (GST) framework. This structure impacts food manufacturers, hindering their ability to claim the full Input Tax Credit (ITC) due to higher tax rate paid for services and other items as compared to lower tax rate of raw materials. The tax rate on basic raw material procurement and final product is 5%, which makes a significant ITC blockage for manufacturers, leading to an average cash flow deficit of 10-15%. For instance, the tax rate on services is 18% whereas the tax of other raw materials range between 12%-18%. This ultimately translates to reduced investments in production capacity, innovation, and job creation”, said Akash Agrawal, Co-Founder of Zoff Foods.

The government should consider revising the tax structure or implementing policy amendments to ensure a smoother flow of ITC for food manufacturers. This will not only improve the financial health of the industry but also contribute to the government's objective of a robust and competitive food processing industry”, he added.

Section 80C tax deduction limit was last hiked in 2014 after the NDA government came to power. The subsequent move towards the new income-tax regime have resulted in Section80C limits remaining static for years. Some tax experts believe that the recent election results might just nudge the government to take a re-look.

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Prior to the Union Budget 2024, manufacturers of handsets and electronics have requested a restructuring of import duty rates. They propose reducing duties on components of mobile phone parts or sub-assemblies gradually to attract global value chains to India and facilitate large-scale manufacturing. This, they argue, would enhance competitiveness against countries like China and Vietnam, which currently benefit from lower and more straightforward input duty structures.

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Economic reforms alone may not always translate into market-friendly practices, says hedge fund investor Samir Arora, calling for not making abrupt changes to the long term capital gains tax regime.

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At present, the basic exemption limit – below which individuals do not have to pay any income tax – for senior citizens is Rs 3 lakh under the old as well as new tax regimes. In case of the latter, it is Rs 3 lakh for all tax-payers.

This should be raised to Rs 10 lakh under the new, minimal exemptions regime, feel tax experts. “There are many senior citizens who earn interest income of Rs 5-6 lakh from their bank or post office deposits. They have to go through the hassle of filing their returns, and managing the paperwork is a tough task for them. By increasing the basic exemption limit to Rs 10 lakh, the government will boost the ease of living for this section of the population,” says Mumbai-based chartered accountant Chirag Chauhan, Founder, CA Chauhan & Co. Read more here

Educationists are hopeful that the first Budget of Modi 3.0 will see a significant increase in the allocation for the education sector with an emphasis on research. They have called for greater investment in research to foster innovation and keep pace with global advancements, stating that strengthening these capabilities is crucial for India’s growth in science, technology, and other critical areas.

Enhanced funding in research and development is seen as essential for building a robust educational foundation that can drive the country towards a knowledge-based economy.

As the Union Budget 2024-25 approaches, home loan borrowers are eagerly awaiting Finance Minister Nirmala Sitharaman's consideration of their longstanding requests regarding tax benefits.

Their demands include an increase in tax deduction for home loan interest under Section 24(b) of the Income-Tax Act, reintroduction of Section 80EEA, and incentives to promote affordable housing, among other measures. Read the Moneycontrol report here

- Assocham has suggested structural reforms in the agriculture sector to enhance productivity, market access, and income opportunities for farmers.

- It also suggested promoting contract farming, investing in agri-infrastructure, facilitating value chain integration, and encouraging diversification into high-value crops.

​Chandrababu Naidu's TDP and Nitish Kumar's JD(U) have requested approximately $5.7 billion (around Rs 48,000 crore) in funds from the Prime Minister Narendra Modi-led Centre ahead of the upcoming 2024 Union Budget, as per documents reviewed by Reuters and a reliable source. The BJP's key allies are seeking these funds for the current fiscal year, along with a higher borrowing ceiling for infrastructure initiatives.

Since 2020, India has introduced incentives aimed at boosting manufacturing across various sectors, from drones to pharmaceuticals, stated a Reuters report. However, manufacturers focusing on novel drugs are currently excluded from these incentives. India's export sales, particularly in the US generics market, are anticipated to grow significantly, potentially reaching $55 billion by 2030. This projection comes from the Pharmaceuticals Export Promotion Council of India (Pharmexcil), a government-supported trade body.

The Union budget will be televised on Parliament's official channels, including Doordarshan and Sansad TV. Additionally, it will be streamed live on the government's official YouTube channels.

Vishal Sharma, Cofounder & CEO of AdvaRisk, an ICICI and NABARD-backed Fintech startup said, "In the times of fast-moving world, it is vital to have skilled workforce that startups can employ. We already have one such scheme Skill India running. More vocational training courses should be included under that programme, for instance, emerging needs of semiconductor industry or AI industry. Moreover, there should be a push to upskill the existing workforce as well.I believe there should be a separate policy for growth stage startups under which the government should ensure credit at subsidised rate."

- Finance Minister Nirmala Sitharaman concluded consultations with a wide range of stakeholders, including industry representatives and social sector leaders, in preparation for the upcoming Budget scheduled for July 23.

- In recent days, Sitharaman and officials from the Ministry engaged in discussions with various groups, including trade unions and farmer associations, to chart out strategies for different sectors and segments in the first Budget of the NDA 3.0 government. read more.

In the interim Budget presented in February 2024, Union Finance Minister Nirmala Sitharaman increased the tourism sector allocation to Rs 2,449.62 crore, a 44.7% rise from the previous fiscal's revised figure.

Rajesh Magow, Co-founder and Group CEO of MakeMyTrip, emphasises the need for further support. “The Travel and Tourism industry has been growing at a healthy rate post-pandemic. The upcoming Union Budget 2024-2025 offers the Hon’ble Finance Minister an opportunity to build on this momentum. Strategic investments in this sector can unlock economic opportunities, boost employment, and enhance the competitiveness of India's tourism landscape,” he said.

Magow believes the time is right for the Finance Minister to introduce changes that incentivise the industry and sustain its growth trajectory.

Leading up to the Union Budget 2024, manufacturers of handsets and electronics are urging for a streamlined import duty structure and gradual reduction in duties on mobile phone components and sub-assemblies. This move aims to attract global value chains to India and facilitate large-scale manufacturing capabilities. More here.

Goldman Sachs economists expect the government to adhere to its fiscal deficit target of 5.1 percentof GDP set in the interim budget but anticipate an "overarching statement" about long-term economic policy. It expects the budget to promote labor-intensive manufacturing through fiscal incentives across sectors such as toys, textiles, and apparel manufacturing, as well as commercial aircraft manufacturing, as per a Reuters report.

In addition to a potential revision of income-tax slab rates, individual taxpayers are advocating for an increase in Section 80C tax deduction benefits. Section 80C allows taxpayers to lower their taxable income by investing in specified investments or spending on certain categories, up to a maximum of Rs 1.5 lakh. There is anticipation among taxpayers that this limit will be raised.

The Section 80C deduction benefits were last revised by the NDA government in 2014 and have remained unchanged since then. Read more here.

- A separate additional deduction for investment in the National Pension System (NPS) was introduced in FY16, allowing taxpayers investing up to Rs 50,000 in their NPS Tier I account to claim an additional deduction under Section 80CCD (1B) of the Income-tax Act.

- The Union government introduced NPS to provide individuals with a pension income to support their needs in retirement. The Pension Fund Regulatory and Development Authority (PFRDA) regulates and administers NPS under the PFRDA Act, 2013.

The upcoming Union Budget might propose increasing the agricultural loan target for 2024-25 by up to 25 percent, potentially reaching Rs 25 lakh crore. This adjustment will be based on the assessment conducted by the National Bank for Agriculture and Rural Development (NABARD) through the Potential Linked Credit Plan (PLCP) at the block level, evaluating the capacity to absorb credit, as per a Moneycontrol report.

Goldman Sachs is expecting a Budget that will not compromise on the capex spend or any relaxation in the fiscal consolidation path. It has turned cautious on raising expectations of any relaxation in fiscal consolidation and a pivot towards welfare spending at the cost of capex, according to a note published on July 8. Read more.

Rajasthan Deputy CM Prem Chand Bairwa says, "This budget will be for Vikasit Rajasthan imbibing the vision of PM Modi and CM Bhajanlal Sharma. The budget will be for the development of Rajasthan. Every section will have something for them in the budget."

According to a report by Bloomberg, PM Modi’s second-biggest ally, JD(U) is demanding 300 billion rupees ($3.6 billion) from India’s federal budget this year to help fund projects in Bihar state, according to people familiar with the matter. The Bihar government, which is led by Janata Dal (United)’s Nitish Kumar, made the request during a pre-budget meeting with Finance Minister Nirmala Sitharaman last month, the people said.

Gaura Sen Gupta, chief economist, IDFC First Bank says, the government's financial surplus has increased dramatically as a result of the RBI dividend. With a significantly lower H1FY25 calendar than anticipated, the Center has already lowered borrowings through Treasury bills.Despite a little increase in issuance in H2FY25, the total amount of T-bills issued for the year is probably closer to Rs 12000 crore. We forecast a 5 percent GDP fiscal deficit, which means we may cut net G-Sec (government security) issuance by Rs 33,000 crore to Rs 10.2 lakh crore.

- During its 53rd meeting in June 2024, the GST Council proposed the introduction of Section 11A into the Central Goods and Services Tax Act 2017. This amendment would empower the government to address instances where Goods and Services Tax (GST) was either underpaid or not levied due to common trade practices.

- While such a provision has not been previously enacted, the GST Council has consistently recommended clarifications to ensure the proper application of GST on the supply of specific goods and services, aiming to resolve multiple interpretations and genuine uncertainties. More here.

Goldman Sachs anticipates that the upcoming Budget will prioritize capital expenditure without compromising on fiscal consolidation. The firm is cautious about expecting any relaxation in fiscal targets or a shift towards increased welfare spending at the expense of capital expenditure, as outlined in a note released on July 8. They project the government will maintain the fiscal deficit target of 5.1 percent for FY25, with a potential further reduction to 4.5 percent by FY26.

- The Central government is actively considering expanding the reach of its Ayushman Bharat health insurance scheme to improve healthcare accessibility. Official sources have indicated plans to double the coverage over the next three years, starting with including all individuals aged 70 and above. There are also discussions to raise the annual insurance coverage from Rs 5 lakh to Rs 10 lakh per beneficiary.

- These proposed changes, projected to cost an additional Rs 12,076 crore annually according to estimates from the National Health Authority, are expected to be announced during the upcoming Union Budget presentation later this month.

- Industry bodies are advocating for incentives to boost research and development (R&D) investments, corporate tax breaks, and the implementation of a robust intellectual property rights framework to foster growth in the domestic pharmaceutical sector.

- Anil Matai, Director General of the Organisation of Pharmaceutical Producers of India (OPPI), outlined these priorities ahead of the upcoming Union Budget, emphasizing the need for deductions on R&D expenditures, incentives tied to research activities for multinational corporations, and tax concessions for businesses.

Finance Minister Nirmala Sitharaman is preparing to unveil her seventh complete budget on July 23. Known for her focus on fiscal discipline, substantial capital investment, and initiatives to promote self-reliance and bolster manufacturing, Sitharaman's past budgets have reflected these priorities. The interim budget she presented in February defied expectations of populist measures typically seen in pre-election budgets, opting instead for a more restrained approach.