Though there is not much to differentiate between the general tax structure for salaried men and women in India, there are a fair few ways in which women can save tax.
It is a heartening trend to witness: increasing numbers of women are becoming financially independent as they join the salaried workforce or start their own businesses. But where there is regular income, there is taxation – while salaried women pay income tax, businesswomen pay income tax as well as GST every month.
However, though there are not many points of difference between taxation structures for men and women, women should consider making a few suitable investments so as to gain from them and also get tax benefits. Consider these options –
* House loan. It might seem counterproductive to spend a large sum of money in order to save tax – but this option has excellent benefits. For starters, taking a house loan enables you to buy a house in your own name. Property is an excellent addition to your financial portfolio, since it is an appreciating asset that is also highly liquid. Another reason to take a house loan is that it provides tax benefits on both the principal and the interest paid (under Sec 80C and 24 of the Income Tax Act, 1961 respectively). You can avail of tax benefits of up to Rs 1,50,000 in a year on the principal borrowing, and up to Rs 2,00,000 per year on the interest. Moreover, some lending institutions offer lower interest on house loans borrowed by women.
Do use a house loan calculator to find out the EMIs payable against the proposed principal borrowing, as well as the tenure. The house loan EMI calculator helps you anticipate the future outgo as far as monthly EMI is concerned. Meanwhile, you can ask your accountant to compute your tax savings on the principal as well as the interest paid for the year.
* Education loan. Have you ever wished to pursue a post-graduate degree but never had the time for it before? Now that you feel that you can free up some time in your busy schedule to study further, you should enrol for the course of your choice – and avail of tax benefits by taking an education loan. Sec 80E of the Income Tax Act, 1961 offers tax exemption of up to Rs 1,50,000 per year against the interest you pay on education loans taken for yourself, or your spouse, or your child(ren). The tax exemption is offered for seven assessment years after taking the loan, or till the time you repay the loan, whichever is sooner. So if you wanted to go to France to study pastry making for a year, or to New York to study architecture, now is your chance.
* Health and life insurance.Taking care of your health is extremely important, since the happiness and peace of your home depends on you. To this end, you eat healthy meals and exercise daily, taking care of the family’s dietary and fitness needs as well. This year, go the extra mile in your journey of good health: buy a health insurance plan. If the plan covers you and your immediate family members, you also get tax benefits on it. Sec 80D of the Income Tax Act, 1961 allows a tax deduction of up to Rs 25,000 per year against the premiums paid for health insurance plans. There is an additional deduction of Rs 5,000 for health plans that you purchase for your senior citizen parents. The premiums may be paid for yourself, your parents, spouse and children.
Meanwhile, secure the financial lives of your nearest and dearest with a life insurance plan that offers tax benefits under Sec 80C of the IT Act. The tax benefits against life insurance, just like health insurance, are offered against the premiums paid in a year – up to Rs 1,50,000 per year is exempt.
* PPF. The Sec 80C of the IT Act, 1961 is a comprehensive one allowing deduction of up to Rs 1,50,000 (cumulatively, not individually) on a range of tax saving options. These options include PPF (Public Provident Fund), EPF (Employee Provident Fund), ELSS (Equity Linked Saving Schemes), etc. Of these, the PPF and ELSS provide good tax benefits as well as good savings over the long run. The PPF is one of the most affordable investment options, since you can invest as little as Rs 500 in it per year. The PPF has a lock-in period of seven years and a maturity period of 15 years – once seven years are up, you can partially withdraw against the funds already deposited in it. Meanwhile, the ELSS helps you gain sufficient capital appreciation on your investment by investing in high grade equity securities. When the scheme matures, you can choose to withdraw the funds or reinvest in it for a further period of time.