Proposal to discontinue exemption of Rs. 1.5 lakh available for Savings under Section 80 C
It is learnt that Finance Ministry is considering to put up a proposal for discontinuing Exemption of Rs. 1.5 lakh presently available under Section 80C for Savings and Insurnace such as premium paid, investment in NSS, Mutual funds, Pension funds etc. Alternatively, the basic income tax exemption limit of Rs. 2.5 lakh would be raised to Rs. 4 lakh. Reasons behind such a bold move by Finance Ministry as per sources are:
1. Income Tax Department could not verify whether the Investments declared to be have been made to avail exemption under Section 80 C were actually made
2. To make Income Tax Law simple by raising basic Income Tax Exemption Limit and avoid complexities involved in providing Income Tax Exemption to promote savings.
Must Read : Income Tax 2014-15 related online tools:
Must Read : Income Tax 2014-15 related information:
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As per Finance Ministry proposals, the current system allows individuals to avail of the Section 80C benefit without having made the required investments.
Most of the tax returns by individuals are processed by what is called a ‘summary assessment’, under which an adjustment in the reported income is made only in cases of arithmetic error or of a wrong claim that is apparent from the return filed. Officials do not ask questions or insist on proof of investment while processing returns. Only in cases of ‘scrutiny assessment’ and ‘assessment of income that has earlier escaped assessment’, which are done in very few cases, more information or evidence is sought to ensure that the reported income is correct.
Even in the case of salaried individuals, where the employer may insist on proof of investments, the tax authorities do not. Besides, if a salaried individual wrongly claims in his return that Section 80C investments have been made, the TDS by the employer and paid to the department is refunded by the tax authorities without asking any questions. In the case of self-employed, there is no check either by the employer or the taxman.
So the ministry feels that any individual who is actually interested in saving would anyway do it and there is really no need to incentivise the same through the tax policy.
Savings entitled to tax benefit under Section 80C include payments towards life insurance, deferred annuity, provident funds, National Savings Certificates, unit-linked investment plans of LIC Mutual Fund, pension funds set up by mutual funds, equity-linked savings plans, deposits with National Housing Bank and tuition free paid for education of children.
Source: Financial Express