There are certain provisions under the Income Tax Act, 1961, that allow salaried women to maximise their tax benefits.
Two such Sections are 80C and 80D. While Section 80D allows tax deduction on health insurance premium up to R15,000 per annum, Section 80C permits deductions for investments up to R1.5 lakh a year.
Health insurance is a basic need and, for salaried women, a policy for a minimum of R5 lakh is an absolute must. If your employer provides health insurance benefits of R1-2 lakh only, it is advisable to take an additional policy. Also, if there are dependent parents and children, it is advisable to go in for a family floater plan that covers their treatment costs.
Under Section 80C, salaried women can claim deduction of up to R1.5 lakh by investing in various tax-saving options. While most salaried women would be contributing to Employees’ Provident Fund (EPF) with a matching amount from the employer, it is also advisable to contribute to the Public Provident Fund (PPF) where the investment ceiling is R1.5 lakh a year. In fact, PPF is a very effective way of creating a corpus for meeting one’s future goals.
While the amount of investment in PPF would differ from woman to woman, ideally, those under 40 years should invest up to R50,000 a year combined in EPF and PPF. For example, if the EPF investment is R25,000, another R25,000 should go into PPF. However, if the EPF amount alone is R40,000-50,000, an additional R10,000-20,000 could be kept aside for PPF annually. Investments in PPF and EPF are safe options as they not only save tax in the year of contribution, but also the interest earned is tax-free. The maturity amount is tax-free as well.
Another option that could be considered is equity-linked savings scheme (ELSS) of mutual funds. These are essential for salaried women with long-term goals, such as retirement and education/marriage of children. To create wealth, allocation to equity is important and this could be met by investing at least R50,000 out of the total R1.5 lakh.
A third option that salaried women must consider is life insurance products like unit-linked insurance plans, term plan or pension plans. Again, the choice would differ from person to person, depending whether the job is pensionable or any other cover is provided by the employer.
Keeping these factors in mind, women should choose the appropriate protection plan.
Those working with the government are covered under pension plans and health insurance benefits are extended to them by the government through a CGHS plan. Depending upon the salary, such a working woman should allocate higher amount in ELSS. A term plan is important and the total sum assured should be at least 7-10 times one’s annual salary. For instance, if a salaried woman earns earns R10 lakh per annum, she should have a term plan coverage of R1 crore.
A woman of means:
For salaried women, a health cover of at least R5 lakh is an absolute must
It is advisable to contribute to Public Provident Fund, where the investment limit is R1.5 lakh a year
Equity-linked savings schemes can come in handy for salaried women with long-term goals such as retirement and children’s education or marriage
By Anil Chopra
The writer is group CEO & director, Bajaj Capital