The last couple of months before the financial year closes are very important for taking tax management steps. Managing tax is important irrespective of the gender of an individual. While investing money in tax saving instruments, a woman must take care of their risk appetite, liquidity aspects, and return expectation. This would help any woman to affectively accomplish her financial goal.
Why Tax Saving Is Important For Women?
It is important for women to save tax, as apart from their individual capacity, if they maintain a good tax status, then they can support their spouse to leverage their collective credit strength. For instance, if a person wants to borrow home loan for purchase of a home, but the eligibility of the person’s income is not matching the requirement of the bank, then the wife’s income can be taken into account which strengthens the loan eligibility of the borrower, provided that the lady has filed IT return, that would show a high disposable income.
Saving tax can help a number of women to build a corpus for the post-retirement phase in their lives.
How to Save Taxes when you are Woman?
There are a number of ways through which a woman can save taxes some of which are enlisted below:
- Under the Section 80(D) of the Income Tax Act a person is allowed to avail a tax deduction up to Rs. 25,000 along with an additional deduction of Rs.5000 if you are a senior citizen against the premium paid for the health insurance of your spouse, children, parents and self. If a woman pays health insurance premium for herself or any other eligible family member, then she can claim the deduction on her income tax returns.
- Tax deduction benefit under Section 80 C is one of the most popular tax savings ideas amongst the taxpayers. Women can take advantage of tax benefits under the Section 80 (C) and make an investment in schemes as, EPF, PPF, ELSS, tax saving FD, etc. and avail a tax deduction up to Rs 1.5 lakh in a financial year.
- Under the SukanyaSamriddhiYojna (SSY), either of the parent i.e. father or mother who is nominated as guardian under the scheme is entitled to avail the tax benefit up to Rs 1.5 lakh under the Section 80 C. However, if you have two daughters, then for one daughter father can be nominated as guardian, and for the other daughter, mother’s name can be nominated as guardian, and both get the benefit under Section 80 C separately according to their contribution in the scheme.
- Investing in Sovereign Gold Bond (SGB) instead of physical gold can also help women save tax in the long term. Investment in gold attracts long-term capital gain tax at 20% (with indexation) and at applicable slab rate in the short term, but under SGB profit made after redemption of a scheme is completely tax free. Also, SGB offers an interest of 2.5% p.a, which is an additional advantage to the investor. Such interest income is taxed at an applicable slab rate of the individual.
- Women usually require greater liquidity to meet their short-term regular expenses. If they keep money in higher interest paying savings account, then for interest up to Rs 10,000 in a financial year they can claim deduction U/s 80 (TTA) and reduce the tax liability to that extent.
- If a women borrows a Home Loan for purchase of a property in her name instead of buying the property in her husband’s name, then she is entitled to avail the tax benefit for interest amount paid against the home loan up to Rs 2 lakh U/s 24 and up to Rs 1.5 lakh for principal repayment u/s 80 (C) in a financial year. Buying a home in woman’s name also allows the advantage of getting a loan at a lower interest rate, and in some states, there is a significant discount on stamp duty for registration of property if the property is bought in a woman’s name.
We have tried to enlist certain ways in which a woman can save tax, however, apart from the above-mentioned ways to save the tax, salaried women can plan and structure their salary in such a way that their taxable income comes down significantly. Women can also claim tax deduction under Section 80 E for payment of interest against the Education Loan for own, spouse or children’s higher education.