Budget 2024: With the government preparing to present the Budget for the 2024-25 fiscal year today, investors are eagerly anticipating potential changes. Many are hoping for an increase in the Section 80C limit of the Income Tax Act. If Finance Minister Nirmala Sitharaman announces a raise in this limit, it could benefit investors in Equity Linked Savings Scheme (ELSS) mutual funds as it would offer them enhanced opportunities for tax savings and investment growth.
Failed to keep up with Inflation
The call from investors to raise the Section 80C deduction limit is driven by the fact that the current limit of Rs 1.50 lakh, set in 2014 during Arun Jaitley’s tenure as Finance Minister, has not adjusted for inflation. As reported by Livemint, increasing the Section 80C limit is crucial to mitigating the effects of inflation on taxpayers. An adjustment would not only help alleviate the inflationary burden but also encourage savings and investments in key financial instruments like ELSS, Tax Saver FDs, and PPF.
Increased LTCG limit could be beneficial
Experts suggest that raising the Long-Term Capital Gains (LTCG) limit from Rs 1 lakh to Rs 3 lakh in the upcoming budget would offer significant relief. The new tax on debt mutual funds has adversely affected their growth, leading investors to call for either the removal of this tax or the reinstatement of indexation benefits for these funds. Equity Linked Savings Schemes (ELSS) remain a popular investment choice for both salaried and self-employed individuals. By investing in ELSS funds, individuals can achieve substantial tax savings under Section 80C of the Income Tax Act.
ELSS Funds
ELSS funds are unique among mutual funds for being eligible for tax deductions under Section 80C of the Income Tax Act, 1961. Investors can claim deductions up to Rs 1.5 lakh by investing in various tax-saving instruments. ELSS funds have a relatively short lock-in period of three years compared to other Section 80C options, and their returns are tax-free. This structure enables potentially high returns from equity investments, with withdrawals also being tax-free.
