Rs 1.5 lakhs limit too low

Today, if you are educating two children in a private school, your tuition fee itself will exhaust Rs 1 lakh in Sec 80C. Added to the provident fund contribution will ensure that the Rs 1.5 lakh, which is the maximum permissible under Sec 80C of the Income Tax Act, will leave you completing the upper limit of Sec 80c. The Finance Minister should increase this limit to Rs 2.5 lakhs.

Enhancing limit will channelize investments into financial instruments

Increasing the limit will compel investors to invest in financial instruments like ELSS, ULIPS, PPF etc. At the moment they would not simply because the Rs 1.5 lakh limit would be exhausted very easily in PPF contribution, childrens schools fees and insurance. So, it definitely makes sense for the Finance Minister to increase the 80C limits, if he wants to channelize investment into financial instruments.

Why he should increase the limits?

This is going to be a Union Budget where the government's finances are pretty comfortable. The fiscal deficit for 2017-18 is likely to be lowered. Tax collection has improved dramatically and compliance is ever improving. This leaves scope for Finance Minister Arun Jaitley to hike the tax exemption limits under Sec 80C.

Some incentive to calm nerves after demonetization

The government is also looking to calm nerves after de-monetization and hence a hike under Sec 80C could be one of the goodies. However, at this stage one cannot be sure whether it will come true. But, if it does it would be a good move, in channelizing money into saving in financial instruments and also incentivizing savings in the country.

Other limits

The government can also hike the other exemption limits including those for conveyance, food coupons, health insurance etc. The options are plenty. Whether they would be announced is the important question.