In a fast-paced world with increasing number of women entering the mainstream workforce—it is even more essential for them to be prudent in terms of managing finances including income tax. Bearing this in mind, some of the key tax provisions, which a woman should be cognisant of, include the following:
Income tax rates
Earlier (up to financial year 2011-12) tax slabs applicable to women were slightly different than that of their male counterparts. However, with changing times tax rate slabs also underwent changes and currently, tax slabs for both category of taxpayers are the same.
Having said that, nevertheless, a woman should evaluate certain specific facts (i.e. level of income, nature and quantum of deductions) to be able to make an informed choice of the existing tax regime or the newly-proposed optional one, as introduced in Budget 2020.
Women taxpayers can consider certain specific investments in order to avail maximum benefits. Some of these include the following:
Specific investments or expenditure
Residential property or house rent allowance: Among specific investments, residential property or house rent allowance are probably the most common. Very often, individuals purchase property jointly with family members (e.g. husband-wife, father-son or father-daughter) If such a property is purchased on loan, certain tax breaks can be availed such as interest on housing loan as well as principal repayment of the loan. For example, the interest on housing loan is allowed as a deduction (up to Rs2 lakh for self-occupied property and full interest deduction for rented) subject to overall cap on adjustment of loss from house property against other income. Further, repayment of housing loan is allowed as one of the eligible investments for purposes of deduction of Rs1.5 lakh under Section 80C of the Income Tax Act, 1961. Hence, if a woman is buying a property jointly, she should be aware about such deductions. These deductions can be claimed by her even if she is the second owner provided, she contributes to the housing loan repayments. The deduction will be in proportion to her contribution. Interestingly, there are certain states (e.g. New Delhi), which levy a lower stamp duty rate on purchase of residential property if the buyer is a female.
If a female employee lives on rent, she can claim a deduction against house rent allowance received, if any, from her employer. Akin to the interest and principal deductions referred above, if such property is taken on rent in joint names, the female employee can consider the deduction from her share of such rent payment.
Government Schemes(Sukanya Samriddhi Yojana):
In order to further the government’s objective of “Beti Bachao, Beti Padhao” Sukanya Samriddhi Yojana (SSY) scheme was launched in January 2015. The focus of this scheme is to encourage parents of a girl child towards building a corpus for funding the child’s education and marriage once she is of age. Under this scheme, an account can be opened by the parents of a girl child aged below 10 years (at the time of opening the account). An amount of Rs1.5 lakh can be contributed annually until the girl turns 21. SSY scheme operates under an Exempt-Exempt-Exempt model for taxation. In other words, the interest accrued annually as well as final withdrawal is completely tax free.
Other tax-related aspects
The Indian tax law provides for various deductions for all, irrespective of genders. Hence, it is equally relevant for a female taxpayer to be fully aware about her tax affairs (rights and responsibilities) and keep a close watch on compliance related to the same.
In an era where more and more women are playing ‘C-suite’ roles, it naturally leads them to review their tax situation and compliances.With India having a lady heading the Finance Ministry—it would definitely encourage the larger women population to take charge of their tax matters in a detailed manner.
The author is the Partner and Head, Global Mobility Services—Tax, KPMG In India