The Institute of Chartered Accountants of India (ICAI) in its pre-budget memorandum has made a recommendation to the centre to increase the annual limit for contributing to PPF to Rs. 3 lakh from the existent limit of Rs. 1.5 lakh. Also, for the 80C, the appeal has been made to increase the limit to Rs. 2.5 lakh from Rs. 1.5 lakh.
The former recommendation in respect of the PPF shall boost channelization of small savings into PPF and in turn help augment and improve savings as a percentage of Gross Domestic Product (GDP) and will have an anti-inflationary impact. And also this limit has remained unchanged for past several years and requires due consideration.
"The revised monetary limit will help in increasing the savings of individuals and is necessary keeping in view the rate of inflation," it added.Additionally, the increase in quantum of deduction under section 80C to Rs 2.5 lakh may provide savings opportunities to the public at large, ICAI opined
Also, there has been recommended changes to the section 80CCC of the I-T Act.As per section 80CCC, if any contribution is made by the assessee to a pension fund and deduction is claimed under that section, all withdrawals from the scheme by the assessee (including the principal amount) are subjected to tax. And this will mean only appreciation component attracts taxation implication.
"Even if the deduction is claimed, only the amount of deduction claimed should be added to the income at the time of withdrawal from the scheme and not the entire maturity proceeds. Of course, any appreciation over the principal invested can also be taxed as a capital gain," it said.