Budget 2019 should bring debt, hybrid funds under Section 80C

Despite being an interim budget, there is no hard and fast rule which stops the outgoing government from framing any new major policies or benefits, and it is widely hoped that the government introduces changes that could help people save more and save better.

One key ask that the Indian middle class has had from the government is more consideration for investments. Currently, the maximum tax exemption one can avail under Section 80C is Rs 1.5 lakh through investment in PPF, equity, provident fund etc.

Considering the increase in income and inflation, this limit is relatively low. An increase in this limit to Rs 2-2.5 lakh would be very welcome and encourage more investment in financial assets.

The government should consider increasing the tax deduction limit for housing loans, especially for buyers in metropolitan cities. A doubling of the current limit of Rs 2 lakh to Rs 4 lakh will be favourable to many borrowers, especially from cities like Mumbai, where most houses are priced at Rs.1 crore and above and the ticket sizes of the home loans are higher.

Increase the tax exemption limit from Rs 2.5 lakh. The last budget had reduced rate of income tax to 5% from an erstwhile rate of 10% in the income slab of 2.5 lakh per annum to 5 lakh per annum. There is a steep jump from 5% to 20% for income between Rs 5 lakh to 10 lakh. We expect some rationalisation here.

Last year’s budget introduced an LTCG of 10% on gains of over Rs 1,00,000 in a financial year. We hope the government revisits this limit and revise it upwards to benefit a growing number of small investors. The government could also explore a separate deduction for ELSS independent of 80C to encourage mutual fund investment.

Senior citizens are eligible for  Rs 10,000 of tax exemption under Section 80TTA, which hasn’t been revised for many years. If this limit can be increased, it would mean much to their financial independence.

Currently, equity is the only mutual fund that qualifies for tax deduction under Section 80C. Asset classes such as debt funds and hybrid funds, which are the go-to investment instruments for the conservative investors, are left outside the ambit of Section 80C. This Union budget should include debt/hybrid funds under Section 80C.

We expect this budget to take up from where the last budget had left off. The last Budget speech announced the setting up of the Fintech Committee, created within MOF to look into the growth and development of the Indian fintech sector, and help ease regulations and boost entrepreneurship in the sector.

We hope that this budget further strengthens the mandate of the Fintech Committee to make India the top Fintech innovation centre in the world by ensuring policy to fast track paperless and presence-less access to finance.

We also hope that this budget would have initiatives aimed at driving digital adoption and awareness by creating customer incentives for online approvals of credit products similar to currently available online discounts for digital insurance policies.