Reserve Bank of India governor Raghuram Rajan favoured increasing the tax exemption limit on financial investments by individuals from Rs 150,000 a year. "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 100,000 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 150,000 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% level from a high of over 36.9 per cent in FY 2008.
Finance minister Arun Jaitley, who increased the limit to Rs 150,000 in his July 2014 Budget, will be presenting the first full-fiscal Budget of the new government on February 28.