A Guide to Tax Planning For Working Women
Tax planning is the process of adjusting your finances to reduce your tax liabilities. For a working woman who has just got married or started a family, it is an especially important step. Without proper tax planning, it becomes harder to achieve your financial goals. Every penny you save on tax can be channelled into investments for your future.
Mar 2023
5 mins read
Share:
What kind of taxes will you have to pay?
Disclaimer: Mutual fund investments are subject to market risks, read all scheme related documents carefully.
You would pay taxes on your income from your employer and other sources. If you are a property owner, you would need to pay property taxes. If you have any capital gains from selling of shares, you would be liable to pay taxes on those too. You can use an online income tax calculator to calculate your tax outgo.
How to save tax through tax planning?
Tax laws provide several avenues of income tax deductions for salaried employees. Through proper tax planning, you will know how to claim deductions on tax to minimise your liabilities:
Tax planning under Section 80C
One of the most popular provisions on tax deductions is Section 80C of the Income Tax Act. It provides deductions on various payments, savings schemes and investments, up to a maximum of Rs. 1.5 lakh every year. Let’s look at some of the important deductions available under section 80C.
- Life insurance premiums: Life insurance premiums are eligible for deduction under Section 80C. However, the deductibility of life insurance premiums has some conditions. For policies issued after 31 March 2012, premiums paid should not exceed 10% of the sum assured. In case it does, the deduction would be applied proportionately1.
- ELSS: Equity Linked Savings Scheme (ELSS) is the only tax saving mutual fund category, i.e. these investments can be claimed as a deduction under Section 80C. They are diversified equity funds with a lock-in of 3 years. Investing in ELSS can give you the benefits of equity investment and ELSS tax benefits at the same time2.
- Other deductions available under Section 80C: You can also avail of deductions for contributions towards the Employee Provident Fund (EPF), Public Provident Fund (PPF), National Pension Scheme (NPS), Unit Linked Insurance Plans (ULIPs) and National Saving Certificate (NSC). 5-year Fixed Deposits (FDs) are also eligible for tax deductions under Section 80C3.
Tax saving under section 80D
Health insurance premiums are deductible under Section 80D of the Income Tax Act. You can claim a deduction of up to Rs. 25,000 on insurance for yourself, your spouse and dependent children. An additional deduction for health insurance premiums of your parents is available for up to Rs. 25,000, if they are less than 60 years old, and up to Rs. 50,000 if they are more than 60 years old4.
Tax savings on home loans
As you consider investing in property, it is important to understand the tax provisions on home loan interest and principal tax benefit. You can avail of deductions on principal repayment under Section 80C, up to Rs. 1.5 lakh.
There is also a home loan interest tax benefit. If you’re wondering how much home loan interest is tax deductible, the answer is that under Section 24, you can claim deductions on home loan interest up to a maximum of Rs. 2,00,000. Beyond this, first-time home buyers can claim an additional home loan interest deduction of Rs. 50,000. There’s more – if your loan has been sanctioned between 1 April 2019 and 31 March 2020, you can claim an additional deduction of Rs. 1.5 lakh under Section 80EEA. For this, the stamp duty value of the property can be a maximum of Rs. 45 lakh. Remember, only first-time home buyers are eligible for this5.
If you are the co-owner of a property and have taken a joint home loan, you can maximise tax deductions on it. Each spouse can claim a deduction of up to Rs. 1.5 lakh on the principal paid and up to Rs. 2 lakh on the interest payments. To avail of this deduction, you have to submit your home loan interest certificate to your employer in order to adjust the Tax Deducted at Source. You can easily calculate the tax benefits on your home loan by using a home loan interest calculator.
Remember to file your returns on time
Whatever your tax planning method, it is important to file income tax returns by the stipulated deadline, or you could face penalties of up to Rs. 10,000. You can file your income tax return online by yourself, or hire a chartered accountant to help you.
In summation, tax planning can help you achieve your short- and long-term financial goals, and is a vital component of your investment planning strategies. You must align your investments with your goals in order to save taxes in an optimal manner – don’t ignore the tax implications of your investments, but equally, don’t make investments just to save tax. Consult a financial advisor who will help you find the right investment avenues.
Disclaimer: Mutual fund investments are subject to market risks, read all scheme related documents carefully.
1 https://www.incometaxindia.gov.in/tutorials/20.%20tax%20benefits%20due%20to%20health%20insurance.pdf
Share:
PGIM India Asset Management Private Limited
(CIN - U74900MH2008FTC187029)
Toll Free Number: 1800 266 7446
Email: care@pgimindia.co.in
This is an Investor Education and Awareness Initiative by PGIM India Mutual Fund.
All the Mutual Fund investors have to go through a one-time KYC (Know Your Customers) process. Investor should deal only with the Registered Mutual Funds (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit https://www.pgimindia.com/mutual-funds/ieid.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
All the Mutual Fund investors have to go through a one-time KYC (Know Your Customers) process. Investor should deal only with the Registered Mutual Funds (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit https://www.pgimindia.com/mutual-funds/ieid.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
The information contained herein is provided by PGIM India Asset Management Private Limited (the AMC)
on the basis of publicly available information, internally developed data and other third-party
sources believed to be reliable. However, the AMC cannot guarantee the accuracy of such information,
assure its completeness, or warrant such information will not be changed. The information contained
herein is current as of the date of issuance* (or such earlier date as referenced herein) and is
subject to change without notice. The AMC has no obligation to update any or all of such
information; nor does the AMC make any express or implied warranties or representations
as to its completeness or accuracy. There can be no assurance that any forecast made
herein will be actually realized. These materials do not take into account individual
investor's objectives, needs or circumstances or the suitability of any securities,
financial instruments or investment strategies described herein for particular investor. Hence,
each investor is advised to consult his or her own professional investment / tax advisor / consultant for advice in this regard.
The information contained herein is provided on the basis of and subject to the explanations, caveats and warnings set out elsewhere herein.
The views of the Fund Manager should not be construed as an advice and investors must make their own investment decisions regarding investment/ disinvestment in securities market and/or suitability of
the fund based on their specific investment objectives and financial positions and using such independent advisors as they believe necessary.
