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How Can ‘She’ Save Taxes In India?

Adhil Shetty

Tax saving can help women use the saved amount in investing and building a higher corpus for retirement, and in accomplishing financial goals more efficiently.

How Can 'She' Save Taxes In India?

The last few months before the financial year closes are crucial for taking tax management steps. This holds true for both men and women. Although there are no special benefits for women paying taxes, they should take care of their essential requirements while planning for taxes. While investing money in tax saving instruments, a woman must take care of her risk appetite, return expectation and liquidity aspects. This would also help her in effectively accomplishing the financial goals.

Why Tax Saving Is Important For Women?

Tax saving is important for women because apart from their individual capacity, if they maintain a good tax status, then it can support the spouse to leverage their collective credit strength. For example, if a person wants to buy a home on loan, but the income eligibility is not as per the bank’s requirement, then the wife can pitch in as a co-borrower to strengthen the loan eligibility, provided she has filed tax that shows a high disposable income.

Tax saving can help women use the saved amount in investing and building a higher corpus for retirement, and in accomplishing financial goal more efficiently.

How Can ‘She’ Save Taxes?

Women can save taxes by various method. Under section 80 (D) of I-T Act, a person is allowed to get a tax deduction up to Rs 25,000 (Rs 5000 additional deduction for senior citizen for FY 2017-18) against premium paid for Health Insurance for self, spouse, children, and parents. If a woman pays health insurance premium for self or the eligible family members, then she can claim the deduction on her income tax returns.

Tax deduction benefits under Sec 80 (C) is very popular amongst the taxpayers. Women can take advantage of tax benefits under Sec 80 (C) and invest in instruments such as PPF, EPF, ELSS, tax saving FD, etc. to get the deduction up to Rs 1.5 lakh in a financial year.

Under Sukanya Samriddhi Yojna (SSY), either the father or the mother, one who is nominated as guardian under the scheme is entitled to get the tax benefit up to Rs 1.5 lakh under Sec 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 can enjoy the benefit under Sec 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 normally require greater liquidity for meeting the 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 woman takes a Home Loan to buy a property in her name instead of buying in the husband’s name, then she is entitled to get the tax benefit for interest 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.

Apart from the above-mentioned ways to save the tax outgo, salaried women can structure the salary in such a way that their taxable income comes down significantly. Women can also claim tax deduction under Sec 80 (E) for payment of interest against the Education Loan for own, spouse or children’s higher education.

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