In this article, Divya Jakhar, discusses income tax benefits for women under the Indian law.

Income taxes are gender neutral if you earn and you will have to pay taxes. However, with proper tax planning, one can save a great deal of income tax. Income taxes are gender neutral, if you earn and you will have to pay taxes. There are a lot of tax saving methods available, even for women, whether married or single. These methods involve taking calculated risks and making wise investment choices.

The government, on an annual basis, announces taxes for various income categories in accordance with the Income Tax Act of 1961. Earlier, there were separate or higher tax slabs for women, which were different from the male taxpayers. These separate slabs were done away with several years ago. Now, the government introduces tax slabs inclusive of both men and women.

TAX SLABS

A percentage of the taxpayer’s income is paid to the government for the betterment of public at large. This income is categorized in various groups on basis of the income of the taxpayers. These groups are known as tax slabs. Tax is charged according to these slabs, at different rates according to the basic salary range given in them. These slabs are revised every year during the presentation of the budget. Following is the tax slab for 2017-2018.

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Income tax for women below 60 years of age

Income tax slab (in Rs.)	Tax
0 to 2,50,000	No tax
2,50,001 to 5,00,000	5%
2,50,001 to 5,00,000	5%
5,00,001 to 10,00,000	20%
Above 10,00,000	30%

Income tax slab for women between 60 and 80 years of age

Income tax slab (in Rs.)	Tax
0 to 3,00,000	No tax
3,00,001 to 5,00,000	5%
5,00,001 to 10,00,000	20%
Above 10,00,000	30%

Income tax slab for women above 80 years of age

Income tax slab (in Rs.)	Tax
0 to 5,00,000	No tax
5,00,001 to 10,00,000	20%
Above 10,00,000	30%

DEDUCTIONS ALLOWED UNDER INCOME TAX ACT, 1961

Deductions for the taxpayer are allowed under certain provisions of the Income Tax Act of 1961. These deductions are essential in trimming down the taxpayer’s taxable income. These exemptions reduce overall liability relating to tax. The amount of deduction depends on the kind of tax deduction claimed by the taxpayer and so it differs. The tax exemptions are provided by the government for several investments or expenses that are incurred in various activities to stimulate commercial institutions. Following are the tax exemption that can be claimed by women to aide their tax savings.

Deductions on Investments (Section 80C)

Section 80C allows deductions to an individual or a Hindu Undivided Family (HUF). A deduction of up to Rs. 1,50,000 can be claimed from the total income of the individual or HUF. Following are the investments and payments that are eligible for deduction under this section

Life Insurance: If an individual pays premiums toward a life insurance policy, such an investment will be eligible for tax benefits under Section 80C. This deduction can be claimed if the insurance policy towards which the premium is paid is insuring self, self, spouse, dependent children and any member of the Hindu Undivided Family. Also, if the insurance policy has been issued prior to March 31, 2012, annual premium of up to 20% of the sum assured by the individual becomes tax deductible. Any policies insured after April 1, 2012, annual premium of up to 10% of the sum assured is tax deductible. Further if the women with a higher investment risk profile, she would have the option of investing in Unit-Lined Investment Plan (ULIP). A maximum amount of Rs. 1,50,000 can be given as an exemption by the government.

Public Provident Fund: Under this section, the contributions under Public Provident Fund (PPF) are eligible for tax deductions. If the PPF account has a maximum deposit limit of Rs. 1,50,000 per year, all the deposits made to this account can be claimed as a deduction under Section 80C. The lock-in period for PPF account will be for a period of 15 years. Only partial withdrawals are permitted after a period of 7 years.

Stamp Duty and Registration Charges: The stamp duty chargers that are incurred by an individual while buying a property has been included as an expense that can be claimed as a deduction under Section 80C. However, this deduction can only be claimed when the construction of the property is complete and the individual has the legal possession of the house.

Sukanya Samriddhi Yojana: Sukanya Samriddhi Yojana is a scheme for girl child where a parent or legal guardian of a girl child, who has not yet reached the age of 10 years, can open an account. The parent/legal guardian may deposit an amount up to Rs. 1,50,000 in that account and will get a fixed return of 9.2% for a lock-in period of 11 years that is till the child turns 21 years old. The parent or legal guardian can withdraw up to 50% of the deposit for higher education needs of the child. Under this scheme, both the accrued interest and the maturity amount remain interest-free. A parent/ legal guardian can open accounts for two girl children and can be extended of twins are involved.

Five Year Bank Deposit: A fixed deposit can be claimed as a deduction under Section 80C. The lock-in period for such a fixed deposit should be for five years.

Equity Linked Saving Scheme: Equity-linked saving scheme is ideal when an individual is looking for an option for wealth creation over a long period of time. An essential point here is that these schemes have a mandatory lock-in period of three years from the date of investment. Therefore, it is always advisable to invest for longer periods like five to seven years. Such investments would qualify for tax deduction under this section.

Senior Citizens Savings Scheme: In order to benefit from this scheme the individual has to be at 60 years of age. This scheme has a lock-in period of five years and would enable senior citizens to qualify for deduction under this section. The interest rate offered is 9.3 % p.a to them under this scheme.

Home Loan Principal Repayment: The principal amount that is to be paid in lieu of a home loan is eligible for deduction under Section 80C. The property has to be fully constructed to be fully eligible under this section. Further, if the individual transfers the property before the end of five years from the date of possession, then the tax benefit will not be granted.

Rajiv Gandhi Equity Saving Scheme (RGESS): A resident individual can claim a deduction under Section 80C and this scheme. The minimum lock-in period, in this case, will be 3 years from the date of acquisition in accordance with this scheme. Also, it is essential that the assessee should be a new retail investor as per the requirement specified under this scheme. Further a deduction of 50% of the amount invested in the equity shares or Rs. 25,000 for 3 consecutive assessment years. It should be noted that the Rajiv Gandhi Equity Scheme has been discontinued starting from 1 April 2017. However, if an individual has invested in the RGESS scheme in FY 2016-17, then she can claim deduction under Section 80CCG until FY 2018-19.  

Contribution to Pension Account: Under Section 80C an individual is allowed deductions if she makes deposits to her pension account. Under this section, the maximum deduction allowed is 10% of the salary of the taxpayer (in case she is an employee) or 20% of gross total income of the taxpayer (in case she is self-employed) or Rs 1,50,000, whichever is less. Further, a new provision has been added under this section for an additional deduction of Rs. 50,000 for the amount deposited by a taxpayer in their NPS account. Also, the employer’s contribution to employee’s pension account can result in an additional deduction of 10% of the salary of the employee.

Health Insurance (Section 80D)

Section 80D of the income tax act allows an individual to claim a deduction of up to Rs. 25,000 per year for paying her health insurance premium. The premium paid that is eligible for deductions can be paid for self, spouse, children and parent. In the case of a health insurance premium for a policy purchased for parents, the tax deduction will go up to Rs. 30,000.

Savings Account (Section 80TTA)

Under this section the interest earned by the individual on her savings account in a bank, a post office or even a cooperative society is eligible for a deduction of up to Rs. 10,000. An individual can also include the interest earned from this account in other income and claim an exemption on the total interest earned by her or Rs. 10,000, whichever is less.

House Rent Allowance (Section 80GG)

If an individual lives in a rented house she can claim that house rent allowance received by them to bring down her taxes. The exemptions from house rent allowance depend on certain criteria such as the basic salary of the individual, the allowance for house rent provided by their employer. Place of residence and the rent payable. The house rent allowance an individual is eligible for can be calculated by determining the following amounts-

• 50% of the basic salary if you’re living in a metro city
• 40% of the basic salary if you’re living in a non-metro city
• 10% of the salary subtracted from actual rent paid

Charity and Relief Funds (Section 80G)

If an individual makes donations or contributions to charitable organizations and relief funds, she can claim a tax deduction of up to 50% of the amount donated by her via cheque, draft or cash (not exceeding Rs. 10,000). In a few select cases depending upon the organizations the donations are made to, the individual can get a deduction of 100%.

Education Loan (Section 80E)

Under Section 80E of the Income Tax Act, a loan taken by an individual for the completion of her Senior Secondary exam can claim the interest of that loan as a deduction. An individual can apply for an Education Loan for higher education for self, spouse, children or any student under her guardianship, and can claim a deduction under this head. This exemption can be claimed for up to eight years or till the interest is paid, whichever is earlier. Further, there is no limit on the amount of interest one can claim for the exemption.

Home Loan (Section 24(b))

If an individual has taken a Home Loan, then she can claim a tax deduction on the interest of that loan under Section 24(b) of the Income Tax Act. If the property is self-occupied, deductions of up to Rs. 2,00,000 under the head ‘Income from House Property’ can be claimed. The construction of property, in this case, should be completed within five years from the end of the financial year in which the loan was taken by her. The deduction will be limited to Rs. 30,000 if this condition is not met. Further, if the individual is a first-time buyer an additional deduction of Rs. 50,000 can be claimed provided certain conditions are fulfilled.

CONCLUSION

There are many ways in which women can save tax especially under many provisions of Section 80C by making suitable expenses and investments, which are generally long-term in nature. It is very important that in order to make the right investment choices, the necessary financial literacy is acquired by them. Thus, they will be able to make more informed choices.