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Income Tax Exemptions for Women in India: What You Need To Know

Women in India have climbed up the earnings ladder drastically in the past decade. However every year when it is Budget time, we all hope that there are benefits for us tax-wise.

The Budget doesn’t really offer too many exclusive benefits to women, but in general there are some areas where everyone can save on tax. Here’s a look at what’s beneficial from a tax perspective, so women can make their choices wisely.

Income Tax Exemptions Women IndiaFor resident women up to the age of 65 years, there is no income tax on net income up to Rs.1,90,000. This is slightly higher than the bar for men, which is Rs.1,80,000.

With effect from April 1st 2011, salaried women have a 10% tax deduction if their employer has invested more than Rs.1,00,000 in the Central Government’s Pension Scheme. There are many different investment options which help in saving tax, and one should always read and research these thoroughly before investing.

Earlier men solely made financial decisions and did all the investing. Now women are not to be left behind, and a lot of them do extensive research on investment options before deciding on what’s best for them.

The most well known Section 80C of the Income Tax Act, offers many tax benefits to investors. One can invest in instruments such as Public Provident Fund (PPF), National Savings Certificate (NSC), Tax Saving Fixed Deposits (FD) and so on, up to a limit of Rs.1,00,000.

Beyond this, one can also purchase Infrastructure Bonds up to Rs. 20,000. There are some market linked products such as Equity Linked Saving Scheme (ELSS) and Unit Linked Insurance Plan (ULIP) which can also be considered.

The risk that you can take with your money varies inversely as your age. If you are in your early working years, you can allocate a higher proportion to ELSS investments as opposed to the fixed income investments such as PPF and NSC.

If you are living in a rented accommodation, then be sure to claim HRA (House Rent Allowance) tax benefits.  There are 3 factors which are considered for HRA – the actual rent allowance given by employer, 50% of basic pay in metros (40% in non metros) and actual rent paid minus 10% of basic pay.

The least of these 3 factors is what you claim as HRA for  tax exemption. There are tax exemptions offered on home loans under Section 80C, and on interest under Section 24. These should also be availed of wherever applicable. Investing together offers some benefits for a couple, such as eligibility for loans.

While doing tax planning and taking investment decisions women should consider three factors – age, income and what financial goals they have set independently as well as from a family perspective.

A right balance of low risk investments such as fixed deposits, and medium and high risk investments such as shares, gold and real estate needs to be struck.

Consider consulting a certified and trusted financial planner as they have the knowledge as well as experience to manage money and put you on the right track.

This is an excerpt from “Personal Finance For Women In India: Plan Your Path To Financial Freedom Forever” authored by Ankush Thakur & Priya Florence Shah, and published by the Naaree™ Academy for Indian Women Achievers.

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