Tax planning is an essential part of financial management for everyone, but especially for women. Women face unique challenges and opportunities in the investment world, such as lower income, longer life expectancy, higher healthcare costs, and lower financial literacy. Therefore, women need to leverage the tax benefits and exemptions available to them and plan their taxes wisely. Here are three smart tax planning tips for women that can help them optimise their income, save money, and achieve their financial goals.
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Utilise Tax Exemptions And Deductions
Women can claim various tax exemptions and deductions on their income, such as:
- Standard deduction:
Women can claim a standard deduction of up to INR 50,000 on their income.
- Section 80C:
Women can invest up to INR 1.5 lakh in tax-saving instruments like Public Provident Fund (PPF), National Savings Certificate (NSC), and Employee Provident Fund (EPF).
- Section 80D:
Women can deduct premiums paid towards health insurance policies for themselves, spouses, children, and parents.
- Section 80G:
Women can avail deductions on donations made to charitable institutions.
By utilising these tax exemptions and deductions, women can reduce their taxable income and pay less tax.
Opt for Tax-saving Investments
To maximise tax savings and grow wealth, women should consider the following investment options:
- Sukanya Samriddhi Yojana (SSY):
If your child is 10 years old or younger, you have the option to invest annually in the Sukanya Samriddhi Yojana (SSY) in her name until she turns 21. This presents a fantastic opportunity to secure your child’s future, thanks to its attractive interest rates and the added advantage of tax benefits as per Section 80C.
- Equity-Linked Savings Scheme (ELSS):
Consider investing in Equity Linked Savings Scheme (ELSS) mutual funds to take advantage of tax benefits offered by Section 80C. ELSS funds channel your investment into the stock market and come with a three-year lock-in period. Over the long term, they can potentially yield greater returns compared to other tax-saving options.
- InveStree:
Celebrate women leading the way in investing with #HERMarket. InveStree is dedicated to making stock trading affordable and accessible for women. When you become an InvesStree member, you’ll enjoy a complimentary Bajaj Privilege Club membership worth Rs.9,999, absolutely free. Plus, trade for just Rs.5 per order instead of the usual Rs.20 fee. You can seize this opportunity to empower your financial journey by opening your demat account with BFSL.
Also Read: How Can Women Plan Their Retirement?
Plan For Retirement
Women should prioritise retirement planning to ensure financial security in the long run. Options such as the National Pension System (NPS) and Employee Provident Fund (EPF) offer attractive tax benefits while building a retirement corpus.
- NPS:
The National Pension System (NPS) offers an extra deduction of up to INR 50,000 through Section 80CCD (1B). NPS empowers you to select your preferred fund manager and customise your asset allocation. Additionally, you have the flexibility to switch between various schemes and fund managers to align with your preferences.
- EPF:
EPF offers tax-free interest, long-term wealth growth, and employer-matched contributions. The interest is tax-exempt up to INR 2.5 lakh per year. You can allocate up to 12% of your basic salary and dearness allowance to your EPF account.
Also Read: EPFO
Conclusion
By leveraging tax exemptions and deductions, and exploring various investment options across tax sections, women can effectively plan their taxes while creating wealth. Tax planning is not only a way to save money, but also a way to express one’s identity, values, and aspirations. Women have the potential to become successful investors if they adopt smart strategies that suit their needs, goals, and preferences.
