Finance planning

How Can Salaried Women Plan Their Taxes?

Women are claiming equality with men in every field of life! And keeping this in mind, the tax provisions are also made common for salaried men as well as salaried women. Couple of years ago, there used to be extra rebate of Rs. 5,000 for tax paying women but that was withdrawn and now the provision of the Income Tax Laws treat salaried women at par with salaried men. There are no extra special provisions available for this segment, as compared to the men folk.

Tax Planning

Now coming to planning taxes for salaried women, the two most important sections which needs to be taken into account are section 80C and section 80D. First, let’s begin with discussing section 80D, which is Deduction from income for paying health insurance premium.

  • Health Insurance of Minimum 5 lac

Health insurance is a basic need of individual and more so of salaried women unless they are covered by their employers for any medical uncertainties. Every salaried woman must go for health Insurance policy for suitable amount. The ideal amount is Rs. 5 lacs. It has been noticed that many individuals have health insurance policies but of a very smaller amount say 1 lac – 2 lacs, but looking at the increasing bills of hospitals for treatments, it is imperative and advisable that sum the assured should be at-least Rs. 5Lacs.

  • Family Floater Plan

Similarly, if the employer is providing health insurance benefits but the extent is only Rs. 1 lac – 2lacs, then it is advisable for salaried women to take additional health Insurance Policies so that this total coverage goes up-to Rs. 5 Lacs. And also if they have dependents like children, parents, who are dependent on her income, then it is advisable to go for a Family floater plan where medical treatment of dependent parents and children is also included. Otherwise any medical expenses can finish the life-long saving. So, it is very important that dependent parents and children are also covered in the health insurance policy by salaried women.

Now the other important section is Section 80C where salaried women can claim deduction up-to Rs. 1.5 lacs by investing in various tax saving options under section 80C umbrella. Here every salaried women will have to look at the her peculiar circumstances, for selecting which option she should choose to claim the deductions under section 80C where the amount has been increased from 1 lac to 1.5 lacs only in the last announced budget.

  • Provident Funds

Now let us understand various tax saving options under section 80C and their suitability to salaried women. One is the Provident Funds, so naturally every salaried women will be contributing something to Employee Provident Fund (EPF) and some amount must be contributed by the employer also, so that itself gets qualified under section 80 C. Apart from this Public Provident Fund (PPF) account is highly recommended for every individual including salaried women because they may have job today but not tomorrow or may be, she is nearing retirement. So, PPF which is very effective way of creating corpus for meeting your future goals is definitely required by every individual. So, apart from your EPF, Public provident fund is strongly recommended.

How much amount should be invested in PPF?

It will differ from women to women and in our opinion for young salaried women, those who are under 40 years of age, up-to Rs. 50,000 combined for EPF & PPF should be invested in the combination of the two. For example if the EPF is Rs. 25000 then another Rs. 25000 p.a can be kept in PPF. However EPF alone itself is already Rs. 40000 -50000 then additional Rs. 10,000 – 20,000 can be kept aside for PPF annually as per the saving capacity of salaried women. But please remember that maximum limit of investing in PPF in 1 years has also been enhanced to 1.5 lacs annually. This is the safest option where they can not only save tax, also the interest earned from such investments is also tax free and when the amount withdrawn after maturity that amount is also tax free. So, because of all these advantages PPF is must for every salaried woman.

Other option to consider is Equity Linked Saving Scheme (ELSS) launched by Mutual funds, these are essential for salaried women with long term goal. Long term goals could be retirement, education of their children or marriage of their children etc. In order to create wealth, allocation to equity is important and this need can be met by investing at-least Rs. 50,000 out of the total Rs. 1.5 lacs into various ELSS schemes and there also mode of investing should be Systematic Investment Plan (SIP) rather than lump-sum.

The third option that salaried women must consider is variety of Life Insurance Plans, which could be ULIP’s, Term Plan or Traditional Plans or Pension Plans. Again the choice will differ from women to women whether the job is pensionable or any cover has been provided by the employer or not, so keeping these factors in mind they should choose the appropriate plan for giving protection to her family or dependents. In very rare cases salaried women has no dependents and living life like a single women, in such case life insurance may be unnecessary or may not required but in most cases any of the above mentioned insurance plans are required. So, every salaried woman must make a list of all her future goals and ensure reaching those goals by variety of tax saving options in these three categories which is the PPF, ELSS and the insurance plans.

Women Working in Government Enterprises

Now out of salaried women, there is also a section of women working in central Government or State Government or enterprises. There most of the employees are covered under the pension plans, so pension planning is taken care of. Also health insurance benefits are extended by the Government through CGHS plan and EPF is also there, which in case of Government is called GPF. Depending upon her salary level women working in central Government, they can afford to allocate higher amount to creating wealth by investing in the Equity Linked Saving Scheme (ELSS). Out of Rs. 1.5 lacs if Rs. 30,000 – 40,000 is consumed by provident funds the remaining amount can be invested in ELSS with the long term horizon. However, please remember that Term Plan is important and the total sum assured or the insurance policy amount should be at-least 7 – 10 times of your annual salary. If they earn Rs. 10 lacs pa then salaried women must have a coverage of Rs. 1 crore. But this is only essential for such salaried women who have families to take care of. For such women who are independent, living alone, unmarried, this insurance cover may not be suitable.

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