Working women and tax planning

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There is need for working women and tax planning for their income. Women are claiming equality with men in every field of life and hence, the tax provisions are also common for men and women. No one doubts that women spend more on certain things than men when they have different needs. 
 
For being truly financially independent, gaining understanding and clarity of the income tax laws that are applicable on your income is very crucial. This will help you in tax planning and in analyzing the impact of income tax rules and regulations on your finances.

Income Tax Slab Rates for FY 2015-16 (AY 2016-17)

 
                                                                               Tax Rate 
Income tax slab
Individual tax payers & HUF (less than 60 years old)
 
Senior citizens (60 years old or more but less than 80 years old)
Super senior citizens (80 years old or more)
Income up to Rs 2,50,000
 
No Tax
NA
NA
Income from Rs 2,50,000 – Rs 5,00,000
 
10%
NA
NA
Income up to Rs 3,00,000
 
NA
No Tax
NA
Income from Rs 3,00,000 – Rs 5,00,000
 
NA
10%
NA
Income up to Rs 5,00,000
 
NA
NA
No Tax
Income from Rs 5,00,000 – 10,00,000
 
20 %
20%
20 %
Income more than Rs 10,00,000
 
30 %
30%
30 %
There are numerous ways in which women can save tax in India.

Working women and tax planning u/s 80C of the Income Tax Act:

Sec 80C allows for a deduction of up to Rs. 1,50,000 for investing in tax-saving options. These options include Public Provident Fund (PPF), Employee Provident Fund (EPF), Equity-Linked Saving Schemes (ELSS), etc.
Section 80C also allows you to get tax benefits by investing in life insurance plans. These can be either traditional life insurance or unit-linked insurance plans (ULIPs). By choosing a good insurance plan, you can not only provide financial protection to you and your family, but also avail tax benefits.
 

Sukanya Samridhi Yojna:

 
If you have a girl child under 10 years, you can benefit from the recently launched Sukanya Samridhi Yojna. You can deposit up to Rs. 1,50,000 each year under this scheme and get a fixed return of 9.2%. Both the interest and maturity amounts under this scheme are tax free. The lock in period for this scheme lasts as long as the girl (who is the account holder) turns 21 years of age, unless the girl gets married, in which case a total withdrawal is possible. A premature withdrawal of up to 50 per cent can be done after 18 years of age for the purpose of her higher education.
 

By taking home loan:

 
Home loans are available at concessional interest rate for women. So, by taking a home loan you can avail tax deduction as per Sec 80D.(Under SBI’s “Her Ghar” scheme, home loans are offered to women applicants or first co-applicants who are women, at a concessional interest rate)
 
Women can get tax benefits on both the principal and interest components of the loan. Section 80C also allows tax exemption of up to Rs. 1,50,000 a year for principal paid on housing loan.
While section 24 provides a tax deduction of up to 2 lakh per year on the interest on home loan. And if it’s a second home or a property not occupied by self, there’s no limit on the tax deduction to be claimed on the interest amount. 
You can avail additional deduction as per budget 2016. You can get an additional deduction of Rs. 50,000 on the interest component on a loan of up to Rs. 35 lakh. The only conditions here are that your house value should not be more than 50 lakh and it should be your first residential property purchase as given in section 80EE.
 

Tax saving options under Section 80D of the Income Tax Act:

 
Section 80D: Deduction for premium paid for Medical Insurance and Preventive Health Check Up:
Deduction is available up to Rs. 25,000 to a taxpayer for insurance of self, spouse and dependent children. Rs. 30,000 deduction available in case of individual or spouse is more than 60 years old. In addition, deduction for insurance of parents (father or mother or both) is available to the extent of Rs. 25,000 if less than 60 years old and Rs 30,000 if parents are more than 60 years old. Therefore, the maximum deduction available under this section is to the extent of Rs. 60,000.
You can claim a tax deduction for the expense of health checkup. The maximum deduction allowed under this provision is 5,000. Deduction of Rs. 5000 is not in addition to the deduction of Rs 25000 or 30000 stated above but is included in the above deduction. This deduction isn’t available separately for everyone. Health checkucan be of yourself, your family or parents.

Tax saving option under Section 80E of the Income Tax Act:

Under section 80E, you can get a tax deduction for interest paid on education loan for seven assessment year after taking the loan or until repayment of the loan. The loan can be taken for the education of self, spouse or children.
 

In addition, woman can take precautions in case of monetary transactions.

 

 1.  Avoiding Gifts from Three Categories of Relatives:

 
You can receive gifts from your relatives and friends. Cash gifts as well as gifts in kind in excess of 50,000 from non-relatives in a financial year are taxable as “Income from other Sources”. Cash or kind gifts can be received from a “relative” without any limit and without any tax liability. However, you (women) should avoid taking gift from three relatives, namely: (i) her husband, (ii) her father-in-law, and (iii) her mother-in-law.
Income from any gift received from these three categories of relatives, whether in cash or in kind, could be liable to be included in the income of the donor under the provisions of Section 64 of the Income Tax Act. Hence you should avoid gifts from these relatives to save tax of your family members. However, an unmarried woman can receive gifts up to 50,000 from her future husband as he does not come under Section 64 of the Income Tax Act. Gifts in kind like property, jewelry, shares, etc received in excess of Rs 50,000 from non-relatives would be taxable as income.
 
 
 

     2.  Avoiding Taking Salary from a Business Concern in which Husband is Interested:

 
You should avoid taking salary from a concern in which the husband is substantially interested, say a proprietary concern or a concern in which the husband has more than 20 % stake in the profits. However, if you hold technical or professional qualifications and receives salary in exercise of your duties due to the possession of such qualifications, no addition would be made in the income of the husband in respect of salary received by you. It is clearly so laid down in Section 64 of the income Tax Act.

Conclusion of Working women and tax planning:

Many women are ignorant about their rights and duties under the Income Tax Act and do not know the legal methods of saving tax by taking advantage of the various provisions for exemptions, deductions, rebates and reliefs under the Income Tax Act. In conclusion, you will get an idea about various sections where you can claim deductions from gross income. Consequently you will save tax.

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