A woman need not club her income with her husband’s income and can be an independent tax payer. There are various provisions under the Income Tax Act, 1961, for exemptions, deductions and rebates which can help reduce the amount paid as tax.
Whether you are a salaried or a self-employed woman, there are some tax saving tricks that you need to know to avail tax benefits.
- Health insurance*
Section 80D of the Income Tax Act, 1961 allows a tax deduction of up to Rs. 25,000 per year for paying health insurance premium with an additional deduction of Rs. 5000 for policies purchased by or for senior citizens. This benefit is applicable for your own health insurance premium and the premiums paid for your spouse, children and parents (not necessarily dependent). By taking a good health insurance policy for yourself and your loved ones, you can not only minimize your healthcare expenses but also save tax.
2. Section 80C of the Income Tax Act, 1961
This section allows for a deduction of up to Rs, 1,50,000 for investing in tax-saving options. Some investment options available under this section are:
- Public Provident Fund (PPF)
- Employee Provident Fund (EPF)
- Equity Linked Savings Scheme (ELSS)
- Life Insurance Premium
- National Savings Certificate (NSC)
- 5-year tax-saving Fixed deposit
- Tuition fees of children
This deduction can be claimed either for investment in one instrument or for investment in multiple options. The cumulative deduction should not exceed Rs. 1,50,000. For working women, the Pension and EPF are already taken care of. For them, ELSS or NSC are good choices of investment.
3. Sukanya Samridhi Yojna
Under this scheme, you can deposit up to Rs. 1,50,000 per year and get a fixed return of 9.2%. This is available for a girl child under 10 years of age. The interest earned and the maturity amount is tax-free. There is a lock-in for this investment. The scheme will last till the girl turns 21 years of age or gets married (whichever happens earlier). Once the girl turns 18 years of age, you can apply for a premature withdrawal of up to 50% only for her higher education.
4. Home Loan
Section 80C of the Income Tax Act, allows an exemption of up to Rs. 1,50,000 per year for the principal component of your home loan. Section 24 of the Income Tax Act, on the other hand provides a tax deduction of up to Rs. 2 lakhs per year on the interest component. The Budget tabled in 2016 provides an additional deduction of Rs. 50,000 on the interest component of your home loan (provided it is your first residential property purchase, the value of the house is not more than Rs. 50 lakhs and the loan amount does not exceed Rs. 35 lakhs).
Apart from the points listed above, financial gifts above Rs. 50,000 received or given have tax implications too. Plan your taxes in the beginning of the year and make use of the provisions and minimise your tax-liability.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
*This is just for information purpose and should not in any way be construed as any kind of promotion or endorsement of any insurance products by the AMC.