The Union Budget 2018-19 will be presented on February 1st 2018. It's time to get your wish list ready. When the Finance Minister Arun Jaitley presents the Union Budget, you have the unique opportunity to see if your wish list comes true.
Tax evasion is a crime, tax avoidance is not. The Government has given you tax exemptions and tax deductions and it's your duty to use them to save tax.
Now to the big question. Will the Union Budget 2018-19 help you save more in taxes? Will the deduction limit under Section 80C be increased? What else will be new in the Union Budget 2018-19?
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You must be well familiar with Section 80C. You are eligible for tax deductions under Section 80C, up to a maximum of Rs 1.5 Lakhs a year, if you invest in certain financial instruments.
The premiums you pay for life insurance plans, the EMI (Principal) on the home loan, investments made in PPF, NSC, ELSS, Senior Citizen Savings Scheme, Tax Saver FD, Sukanya Samriddhi Yojana and some other investments are eligible for tax benefits under Section 80C.
The deduction limit under Section 80C has been at the current Rs 1.5 Lakh, since Arun Jaitley presented his first budget in July 2014-15. There are chances that the deduction limit under Section 80C could be hiked to Rs 2 Lakhs.
SEE ALSO: What All Comes Under 80C?
The premiums you pay on life insurance plans like endowment life insurance plans, term life insurance plans, ULIPs, enjoy a tax deduction under Section 80C. The total deduction of Rs 1.5 Lakhs a year under Section 80C is shared among life insurance plans, EMI (Principal) on home loans and a number of investments like PPF, NSC, ELSS, Senior Citizen Savings Scheme and some other investments.
Simply speaking....Section 80C is getting a little crowded. The insurance industry wants a separate limit for life insurance plans. Among all life insurance plans perhaps, term life insurance is the most important. It is a pure protection plan with no survival benefits.
Term life insurance plans could get a separate tax deduction in Union Budget 2018-19.
3. Up to 60% of the NPS Corpus must be made tax free
Let's say you invest in the National Pension Scheme popularly called the NPS. On retirement (most of the citizens retire at 60), 40% of the accumulated money in your account (NPS Corpus), has to be compulsorily used to buy an annuity plan.
Remember: The money invested in an annuity plan is not taxed. The pension you get from the annuity plan is taxed.
The problem is with the remaining 60% of the NPS Corpus. Out of this 60%, only 40% is tax free. The remaining 20% is added to your taxable salary and taxed as per the income tax bracket you fall under. At the time of retirement, you and most other citizens will probably be in the 30% tax bracket. You will lose a lot of money in tax.
NPS comes under the EET tax regime and not the EEE tax regime. For those who don't know, an investment in PPF or ELSS enjoys the EEE benefit. The investments you make are tax free up to Rs 1.5 Lakhs a year. The returns and the money you get at withdrawal are tax free.
One of your wishes for the Union Budget 2018-19? Up to 60% of the NPS Corpus must be made tax free.
This is a small wish list for the Union Budget 2018-19. There's more to come. The Union Budget 2018-19 can help you save a lot in taxes.
Be Wise, Get Rich.
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