This years budget proposals have given only marginal relief to taxpayers. Minimum exemption limit has been increased from Rs 1,80,000 to Rs 2,00,000 and the upper limit on the 20 per cent slab has been increased from Rs 8,00,000 to Rs 10,00,000. However, there was no mention of section 80CCF, which was introduced in 2010 for one year and then extended by one more year in Budget 2011.
Hence, deduction under this section will not be available any more to taxpayers. This is a disappointing development as tax liability will go up by Rs 6,180 for taxpayers in the 30 per cent tax bracket as they do not have any avenue to save tax u/s 80CCF since the same has not been continued in the next year.
Tax free bonds by public sector undertakings have been hugely popular amongst India's high taxpayers. Companies like NHAI, IRFC, Hudco and IIFCL have been allowed to tap public savings to the tune of Rs 60,000 crore, which is good news for rich classes.
Section 80C is the most popular section amongst taxpayers to reduce their tax liability. However, this section has not been touched at all which means that the maximum limit of deduction remains at Rs 1 lakh.
PPF continues to enjoy EEE (exempt, exempt, exempt) status, which means that contribution up to Rs 1 lakh in one year will be reduced from your taxable income and you can save up to Rs 30,000 in income tax provided you are in the 30 per cent tax bracket. Also, the current interest rate of 8.6 per cent per annum is totally tax free.
Further, there is no tax levied at the time of redemption or withdrawal. Thus, PPF will continue to remain the darling of the masses, while NSCs have fallen out of favour.