Rs 1.5 lakh as savings cap,says House panel

The limit should be 'periodically revised to keep it in sync with the prevailing market conditions'.

A parliamentary panel has suggested that the cap for longterm savings be raised from Rs 1 lakh to Rs 1.5 lakh in the proposed Direct Taxes Code (DTC),scheduled to be implemented from April 1 next year.

The standing committee on finance,which is vetting the DTC,agreed in its meeting today that the current limit is inadequate considering the social security needs of the country.

The Yashwant Sinha-headed panel has suggested that the combined deduction limit for spends on health insurance,life insurance and childrens education be raised from the proposed Rs 50,000 per annum to Rs 1 lakh so that all these expenses are covered in a reasonable manner.

The panel has recommended an additional deduction of Rs 20,000 for health insurance for senior citizens,and an additional deduction of Rs 25,000 for higher education fees.

It has suggested that the deduction limit of Rs 2,000 per month be raised to Rs 5,000,given the rising cost of living space. The limit should be periodically revised to keep it in sync with the prevailing market conditions.

The panel is likely to finalise its report on March 2. If the government accepts its suggestions,middle class taxpayers battling rising prices and stagnant incomes will get significant relief.

Gross domestic savings fell to 32.3 per cent of GDP from 33.8 per cent the previous year,mainly because of the decrease in the rate of financial savings of the household sector from 12.9 per cent to 10 per cent,as per quick estimates of the government released recently.