The government is mulling a proposal to allow tax exemptions of up to Rs 2.5 lakh for saving under Section 80C of the Income Tax Act, according to an Economic Times report. The idea is to put more money in the hands of the savers to push consumption and help revive the economy.
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A separate exemption under the Section for investments up to Rs 50,000 in National Savings Certificate (NSC) and raise the maximum annual investment limit in Public Provident Fund (PPF) to Rs 2.5 lakh, the report added.
The present exemption limit under Section 80C is Rs 1.5 lakh, including PPF investments and NSCs.
The Indian household sector's saving rate fell to 17.2 percent of gross domestic product (GDP) in FY18 from 23.6 percent in FY12, the ET report said.
Since FY12, household savings in financial assets have hovered at 7 percent of GDP, it added. At 27 percent, bank deposits account for the biggest share.
"A proposal to allow tax incentives on small savings schemes, especially PPF and NSC, is with the finance ministry. If given the go-ahead, these would be part of the budget announcement," ET quoted an unnamed official familiar with the development as saying.
The government's move to slash corporate tax rate has sparked calls for cuts in personal income tax, the ET report said.
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