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Budget suggestions: Simplification of S.80C of the Income-tax Act, 1961 and to make tax saver fixed deposits more user friendly and flexible.

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Budget suggestions: Simplification of S.80C of the Income-tax Act, 1961 and to make tax saver fixed deposits more user friendly and flexible.
January 12, 2021
All Articles by: DEV KUMAR KOTHARI       View Profile
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Section 80C of income tax Act, 1961 is a popular provision and is useful for most of assesses who are individuals and HUF. This provision is also very complex and need to be simplified. For ease of general public who file Returns of Income provisions of this nature should be abundantly clear and unambiguous. In this provision we find several type of investments which have some limitations and overall limitations. Furthermore an overall limitation is also provided in S. 80CCE.  Which provide that the aggregate amount of deductions under section 80C, section 80CCC and 2[sub-section (1) of section 80CCD] shall not, in any case, exceed 3[one hundred and fifty thousand rupees].]

Therefore, in overall, the provision for providing minor relief by way of a deduction, from income for some investments and payments, conditions laid down, limits provided provisos and explanations in provision make it highly complex and even tax experts have to read again and again the provision.

Tax saver fixed deposits:

Tax saver fixed deposit is one of popular option and there are many other investment options like EPF, PPF,NSE etc. All of them are governed by specific provisions and in tax treatment also there are differences. These differences can be removed and all investments of long-term nature can be permitted for deduction.

Tax saver fixed deposit (FDR) and NSC are two options which are different in their nature and also different from other options.

Tax saver fixed deposit in banks is easy to make and maintain in comparison to NSC and PPF

It is requested and suggested that tax saver fixed deposits be allowed benefits similar to NSC. In this regard both can be made at par by making following changes:

 Tenure and rate of interest can be made similar for NSC and FDR. The tenure can be increased to seven years with other facility as suggested in this write-up.

Loan or OD facility against tax saver FDR be permitted as is allowed in case of NSC.

Interest accumulated be made eligible for deduction as in case of NSC.

 Early withdrawal with proportionate addition to income can be allowed.

Allow to other assesse like AOP , BOI,  firms and companies also.

 Limit for investment can be increased or removed. 

 TDS in case of early withdrawal can be introduced. 

These changes can be made in S.80C or a separate new provision can be inserted.


By: DEV KUMAR KOTHARI - January 12, 2021



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