Mumbai:
Days ahead of the Budget, Reserve Bank Governor Raghuram Rajan today pitched
for increasing the tax exemption limit on financial investments by individuals
from Rs 1.5 lakh a year.
Acknowledging
that there was a Rs 50,000 increase in the limit in the last budget to Rs 1.5
lakh a year, he said benefits of this instrument have been lost over time as
the limit was anchored at Rs 1 lakh for a long time.
“Remember
the government increased the limit for tax benefit in savings by Rs 50,000 in
the last budget. The question is — is there room for more primarily because the
real tax benefit has fallen over time because the limit was at Rs 1 lakh for a
long time. Maybe what we have to do is increase that,” Rajan said on a call
with analysts.
Investments
of up to Rs 1.50 lakh in Public Provident Fund, Provident Fund, New Pension
Scheme, insurance policies and equity-linked saving schemes is deducted from
the taxable income under Sec 80 C. This helps in financial savings.
It can
be noted that the national savings rate has dipped to the 30 per cent level
from a high of over 36.9 per cent in FY 2008.
Finance
Minister Arun Jaitley, who increased the limit to Rs 1.5 lakh in his July 2014
budget, will be presenting the first full fiscal budget of the new Government
on February 28.
Rajan
said also that the RBI would like to see quality fiscal consolidation with a
shift to capital spending rather than on mistargeted subsidies.
“A
movement of spending from mistargeted or poorly targeted subsidies towards more
capital investment would be a good move,” he said, clarifying that the RBI is
not against subsidies and there are sections which need to be given the benefits.
He said
such a shift in spending will also help in inflation management as the supply
side constraints will be removed with capital spending by the government.
The RBI
had yesterday linked the future course of its policy action to fiscal consolidation.
PTI
(4-2-15)
