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Tax treatment

Taxing women


Many countries are realising that tax policies should keep in mind the changing needs of women. TOI-Crest lists reasons why India needs to follow suit.

For a few years, Indian tax laws provided a higher income tax exemption slab for working women, but last year's budget re-introduced parity in basic exemption limits (see box). This may present a problem for many.
While 'gender budgeting' - through fund allocation for various programmes - attempts to take care of the weaker sections of women, our tax policies also need to focus on the other sections as well - such as urban working class women or middle-class housewives.


A country like the US which provides for a joint filing mechanism is viewed as discriminating against women. Typically, it is the wife who earns a lower income and in case of joint filing the tax on her income starts at the highest marginal tax rate of her husband - who is the primary income earner. Joint filing is also available in Belgium, Brazil, Switzerland and a few other countries. Indian tax laws, which provide for individual tax filings, do not suffer from such gender inequity but neither can these tax laws be considered pro-women.

Singapore has various working women friendly tax policies. A separate working mother's child relief is available to those earning less than Singapore dollars 4, 000 (Rs 1. 74 lakh) per year. It is based on a percentage of the mother's income and this percentage increases with the number of children. If grandparents take care of kids below 12 years, the working mother can avail of an additional Singapore dollars 3, 000 (Rs. 1. 31 lakh) as a deduction. Even a foreign maid deduction is available.

In South Korea, women tax payers who are the head of a household with dependents get an additional exemption of Korean Won 500, 000 (Rs. 25, 000 appx). Malta recognises that women owing to family responsibilities do have to take a career break. When a woman rejoins after a gap of at least five years, she can claim a tax credit of a little over Euro 1, 000 (Rs. 73, 000) for two consecutive years.

"Rather than doling out bits and pieces through a plethora of deductions or exemptions - which could also be subject to misuse, a reasonably higher exemption limit for women is the best solution, " feels Nikhil Bhatia, executive director, Pricewaterhouse Coopers (PwC). "But, to prevent tax abuse, such higher exemption limit should be for well-defined classes of women. Else, for instance, business operations could be set up in the name of women to take advantage of the beneficial tax laws, " cautions Bhatia.

"Tax incentives can also boost the social status of the girl child. The parent, earning a higher taxable income could be provided a deduction on the birth of a girl child and then till she attains the age of 18. Education of the child, could be a condition for claiming the deduction, " suggests Sonu Iyer, tax partner, Ernst and Young.


Delhi and some States like Punjab, Haryana, Madhya Pradesh offer a discounted rate of stamp duty if the property is registered in a women's name. However, under income tax laws, if property is gifted to a wife without consideration, the husband continues to be treated as the deemed owner. Thus any income from such property (such as rental income) is taxed in the husband's hands. For transfer of other assets in the name of the wife, such as securities, clubbing provisions apply. If the husband earns more than the wife, the income from such asset is clubbed with his income and he has to bear the tax. Such provisions are meant to prevent tax abuse.

Recognising the need for anti-abuse provisions, Iyer suggests: "For calculating income from house property, first municipal taxes are deducted from rent receivable and annual value is arrived at. Against this annual value a flat deduction of 30 per cent is available. The balance, after deducting expenses such as interest on housing loan, is taxable income from house property. This flat deduction could be raised to 50 per cent if the property is solely registered in the wife's name. "

Naushad Panjwani, Sr Executive Director, Knight Frank (India), points out that differential tax rates, including those in stamp duties, are susceptible to abuse. He offers an alternative solution, which would not cause any drain on the exchequer and minimise the scope for misuse: "Any residential property or investment property purchased post marriage must mandatorily be jointly registered. This would provide a lot of security, especially to rural women. "

"As the objective is to provide women with a security blanket, this regulation need not apply if the woman herself is a high income earner, or it can be calibrated for other working women - higher the income, lower should be her stake in such property purchased by her husband, " explains Panjwani.

Evidently, it is time for our legislatures to think differently and issue appropriate women friendly tax policies.

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