Union Budget 2024: These mutual fund investors will benefit if Section 80C limit is increased
A revision in tax exemption limits of the Income Tax Act's Section 80C would benefit ELSS Mutual Fund investors.
As Finance Minister Nirmala Sitharaman is scheduled to present the Union Budget 2024 on July 23, expectations are that there may be multiple changes to income tax. A change in the Section 80C limit of the Income Tax Act can however, benefit Equity Linked Savings Scheme (ELSS) mutual funds.
What are Equity Linked Savings Scheme (ELSS) mutual funds?
Equity Linked Savings Scheme (ELSS) mutual funds are tax-saving mutual funds that use the tax deduction provisions under Section 80C to save tax expenses on equity share investments.
They have a 3-year lock-in period, due to which, only long term capital gains tax can be levied upon them.
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However, ELSS funds are currently the only mutual funds also eligible for tax deductions under Section 80C of the Income Tax Act of 1961, with claim deductions up to ₹1.5 lakh possible.
Up to ₹1.5 lakh annually can be tax-free, with any amount above this being levied upon, a 10% long-term capital gains tax. This ₹1.5 lakh limit was established in 2014 by Finance Minister Arun Jaitley.
What are the Section 80C limits?
Section 80C of the Income Tax Act 1 makes it possible for some specified expenditures and investments to become exempt from income tax.
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What are the expert opinions on Section 80C limits?
An adjustment in the Section 80C limit would assist taxpayers in managing the impact of inflation, increase their savings, and enable investments in essential financial instruments like ELSS, tax saver FDs, and PPF, a Mint report quoted Archit Gupta, CEO of Clear as saying.
It would redirect more capital into critical sectors such as insurance, PF, and ESOPs, Siddharth Maurya, Founder & Managing Director of Vibhavangal Anukulakara Private Limited told Mint.
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“Increasing the LTCG limit for deduction from ₹1 lakh to ₹3 lakh would provide significant relief," Mint quoted Preeti Zende, a Sebi-registered investment advisor and founder of Apna Dhan Financial Services. "Additionally, the new tax imposed on debt mutual funds harms their development. Investors are calling for reversing this tax or, at the very least, restoring indexation benefit for debt mutual funds.”