Taxation for Women: Benefits, Types

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In the previous chapter, you got to know some of the best investments for women in India. But with investments come returns, and with returns come taxes. If you’re not careful, your taxes could eat into the gains you earn, bringing the net returns down considerably. Fortunately, if you know a thing or two about taxes, you can create a smart financial plan that helps you save tax and enjoy more optimal returns.

Tax benefits for women

Earlier, women and men had different income tax slabs. The Income Tax Act, 1961 included a provision of tax relaxation for female taxpayers. These concessional tax rates meant that the tax women paid for a given level of income was lower than what men paid. And these tax benefits for women were in place till financial year 2011-12.

But from financial year 2012-13 onwards, the income tax rates for men and women were made equal. And that’s how things stand today, in the financial year 2021-22 as well. However, despite the fact that there is no specific tax relaxation for female taxpayers, there are some key things to know about taxation if you’re a woman. These pointers can ultimately help you save tax and plan your finances better.

5 important things to know about taxation

Tax planning is an art that can save you thousands of rupees when done right. In the process, you can also add to your investments and secure your future. So, to help you become a smarter taxpayer, here are 5 key things you need to know.

  • Some investments come hand-in-hand with tax benefits

There are a host of investment options that offer tax benefits for women. It is crucial for you to get to know what they are, so you can take advantage of the tax benefits. Check out some of them below.

  • Public Provident Fund (PPF)
  • National Savings Certificate (NSC)
  • Sukanya Samriddhi Yojana
  • National Pension System
  • Life insurance plans
  • Tax-saving fixed deposits
  • Equity Linked Savings Scheme (ELSS) 

These are a few of the investments that can help you save tax. In fact, you can reduce your total taxable income by up to Rs. 1.5 lakh each financial year by investing in these schemes, thanks to section 80C of the Income Tax Act, 1961.

  • Other investments give taxable returns

Just like how it is important for you to get to know the investments that offer tax benefits for women, it is equally important to know about the ones that don’t offer any benefits and are taxed according to your income tax slab instead. Here’s an illustrative list of such investments or benefits.

  • Pension plan annuity payouts
  • Short-term capital gains arising from debt funds 
  • Short-term capital gains arising from hybrid debt funds
  • Interest arising from tax-saver fixed deposits
  • Regular fixed deposits interest
  • Interest from National Savings Certificate
  • Recurring deposits interest

These are some of the investment returns that are taxed according to your income tax slab rate.

  • You can use home loans to your advantage

Did you know that home loans can provide tax relaxation for female taxpayers too? Sounds too good to be true, doesn’t it? But it is true. You can claim both the principal and interest on your home loan as deductions from your total taxable income.

According to Section 80C of the Income Tax Act, you can deduct principal repayments on your home loan to the tune of Rs. 1.5 lakhs from your total taxable income each financial year. That’s not all. Under section 24, you can claim home loan interest payments up to Rs. 2 lakhs as deductions as well.

  • Is HRA a part of your salary? Use it to save tax.

Here’s another idea. The House Rent Allowance (HRA) that employers pay employees can also be used to reduce the tax women pay each year. Under section 10(13A) of the Income Tax Act, 1961, you can claim the HRA that you receive from your employer as a deduction from your total taxable income.

On the other hand, if you’re self-employed but stay in a rented accommodation, you can still make use of the provisions under section 80GG of the Income Tax Act, 1961 to claim the rent you pay as a deduction. However, you will have to provide Form 10BA at the time of filing your income tax return.

  • Investing in your child’s future can also help save tax

Though planning and investing for your child’s future can seem overwhelming, it can also be rewarding if you plan it right. One way to do this is to use education loans to your advantage. If you’ve taken out an education loan for your child, you can claim the interest repayments on the loan as deductions from your total taxable income under section 80E of the Income Tax Act, 1961. Alternatively, if you have a girl child, you can invest in the Sukanya Samriddhi Yojana and claim the investment amount as deduction up to Rs. 1.5 lakh each year.

 

Wrapping up

As you can see, the Income Tax Act, 1961 offers several tax benefits for women. And so, the next time you invest, ensure that you do so in a scheme that offers tax relaxation for female taxpayers. Up next, we’ll take a look at how working women can get better at career planning.

A quick recap

  • Tax planning is an art that can save you thousands of rupees when done right. 
  • There are a host of investment options that offer tax benefits for women. It is crucial for you to get to know what they are, so you can take advantage of the tax benefits. 
  • Just like how it is important for you to get to know the investments that offer tax benefits for women, it is equally important to know about the ones that don’t offer any benefits and are taxed according to your income tax slab instead. 
  • You can also use home loans to your advantage, and use HRA to save tax if it is a part of your salary.
  • Investing in your child’s future can also help save tax.

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FAQ'S

Both the old and the new tax regimes do not differentiate between taxpayers of the two genders. The only difference is that the old regime has higher tax rates, but a greater number of deductions, than the new tax regime.
The premium paid for health insurance can be claimed as a deduction from your total income, as per section 80D of the Income Tax Act, 1961. The basic limit for claiming this deduction is Rs. 25,000, for premiums on policies taken for yourself, your spouse or your children. In addition to this, you can claim an extra Rs. 25,000, for premiums paid on policies taken for your parents. If your parents are senior citizens, the deduction can be claimed up to Rs. 50,000.
Women taxpayers, like male taxpayers, are typically expected to file their tax returns by July 31 each assessment year. However, the government sometimes extends the deadline for filing the return. In that case, the due date for filing the ITR is postponed.
Previously, the basic exemption limit for women was higher than the limit set for male taxpayers in the country. However, since 2012-13, this segregation has been abolished, with tax slabs being determined solely based on an individual’s income and age.
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