Mr Mathur, aged 30 years, is a salaried individual. He earns Rs 3,50,000 per annum. His wife Mrs Mathur, aged 28 years, also earns Rs 3,50,000 per annum. Both make investments in Life Insurance, public provident fund and other investments eligible for deduction under Section 80C of the Income-Tax Act, 1961 (Act) up to the maximum permissible limit of Rs 1,00,000. However, income tax of Rs 25,500 is deducted at source from Mr. Mathurs salary against a tax deduction of only Rs 21,930 in the case of Mrs Mathur.
Same Salary! Same Investments! Then, why the difference? Answer: lets take a peep into the beneficial tax treatment available for women resident in India.
From April 1, 2005, onwards, the limit of maximum amount not chargeable to tax has been increased from Rs 50,000 to Rs 1,00,000 for all individuals. However, in the case of women who are resident in India and are below the age of 65, the threshold limit is Rs 1,35,000.
In other words, the provisions allow women to earn an income of Rs 1,35,000 without payment of any income tax. Also, from the same date, Section 80C has been introduced. This allows reduction from taxable income for all individuals by the amount paid for life insurance premium, provident fund, tuition fees, tax saving mutual funds, National Savings Certificates, housing loan etc. as prescribed.
The reduction is subject to a limit of Rs 1,00,000. Before April 1, 2005, also, women were given preferential treatment in the form of a special rebate under Section 88C of the Act. The section was introduced with a view to encourage working women to be financially independent. It provided for a special rebate up to Rs 5,000 from income-tax for a woman who is an Indian resident and below the age of 65.
There was a separate column in the tax return for disclosure of the amount of rebate claimed under this section. Effective April 1, 2005 Section 88C has been deleted. Thus, with the above amendments, the grant of tax relief to women has shifted from deduction from income-tax to deduction from taxable income.
By Prashant Khatore & Anju Thukral/ Ernst & Young