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Finance minister Arun Jaitley’s maiden Budget proposes to increase the maximum amount of income not chargeable to tax to Rs 2.5 lakh from Rs 2 lakh, implying an annually saving of Rs 5,150 for individuals earning from Rs 3 lakh to Rs 15 lakh per annum. If one considers the increase of Rs 50,000 in the maximum amount eligible for deduction under Section 80 C of the Income-Tax Act, 1961, as well, then the amount saved turns out to be R10,300 for those earning Rs 5 lakh per annum. Those earning Rs 15 lakh annually can save as much as Rs 20,600 per annum.
Jaitley has also proposed to increase the deduction for interest paid on borrowed money from banks on self-occupied house property to Rs 2 lakh from Rs 1.5 lakh.
Vikas Vasal, partner, Tax, KPMG, said the tax relief is a welcome move, especially when the government is battling a tough macro-economic situation. “The increase in tax deduction under Section 80C will help achieve twin objectives of encouraging households to make long-term savings and increasing the overall savings rate in the economy, which has fallen considerably over the last five years. The higher deduction for interest paid on housing loan will boost the housing and banking sectors and create job opportunities for unskilled and semi-skilled workers.”
Rajesh Sud, CEO & MD of Max Life Insurance, said the tax initiatives would allow more money in the hands of the customer, which is positive for long-term saving instruments, including life insurance.
Lauding the hike in foreign direct investment in insurance from 26% to 49%, Tarun Chugh, MD & CEO of PNB MetLife, said it was a positive move and would help the industry gain an additional R7,800 crore.
“We are also encouraged by the increase in Section 80C limit to Rs 1.5 lakh. While we would have looked forward to a separate limit for life insurance, we are sure the current measures will help retail customers, who will benefit from the enhanced tax benefit on savings products, including life insurance.”
To boost small savings, Jaitley has raised the limit of Public Provident Fund to Rs 1.5 lakh per annum from R1 lakh. This will benefit risk-averse investors who will get tax-free returns.
The popular Kisan Vikas Patra will be re-introduced by the postal department for those who may have banked and unbanked savings to