Budget 2024: What is Section 80C deduction and will the government increase its limit?

Under Section 80C of the Income Tax Act, a taxpayer is eligible for a maximum of ₹1.5 lakh in tax deductions. Notably, they are free to invest in one or more savings vehicles, as long as it is under the limit.

Taxpayers can claim the deduction for investments through specific savings plans or for payments of specific investments and expenses that come under the 80C category. The section applies to individuals and Hindu Undivided Families (HUFs) only.

Many individuals choose this section as their preferred tool for saving taxes if they go for the old tax regime. Tax deductions and returns aren’t allowed in the new tax regime.

An individual can claim several deductions against investments and exemptions like house rent allowance (HRA) under the old regime, while paying a higher tax percentage. In the new regime, they will have to pay a lower tax percentage while forgoing most deductions and exemptions.

Back in 2014, Arun Jaitley, the then Union Finance Minister, increased the 80C limit to ₹1.5 lakh from the previous limit of ₹1 lakh. Since then, there has been no change in the section despite the high inflation rates that the country has witnessed.

The taxpayers are hopeful that the government will increase the 80C limit while presenting the Union Budget 2024.

To claim a tax deduction from gross taxable income through Section 80C, individuals have to make an investment in the selected expenditure. They have to calculate their gross taxable income and claim the deduction by filling out the ITR form.