Everything women need to know about tax planning

Tt is imperative that working women take all possible measures to mitigate tax outflow and save their hard-earned wealth

While tax planning is necessary for all individuals, it is especially important for women. Several recent studies have depicted that women have faced more job losses, and greater difficulty balancing work from home during the social distancing necessitated by the Covid-19 pandemic, when compared to their male counterparts.

With unequal pay and the cumbersome work-life equation creating difficulties for women, it is imperative that working women take all possible measures to mitigate tax outflow and save their hard-earned wealth.

Why should women plan their finances?

Planning their finances help women achieve a tremendous measure of independence, protection, and purpose. Many times, women prioritise their responsibilities as a mother and wife over their careers, putting their independence at risk. However, judicious financial planning can help you coast through the homemaking years while still holding on to your savings. As a single woman, it is even more important to secure your finances as you may not have a partner to depend on, in case of emergencies.

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Astute financial planning also secures your future, especially if you wish to retire at an early age. According to a report by the World Health Organization (WHO), women tend to live an
average of six to eight years longer than men. This means that you should create a financial plan airtight enough to sustain you in your post-retirement life. Additionally, financial planning will also enable you to meet your purpose and goals in life. Be it a foreign vacation, or buying that dream house, financial planning can help you fulfill your wishes.

The importance of tax planning

As you all know, women have to work doubly hard to earn money and respect. Why let tax outflows eat into your nest egg?

Tax planning offers you a legitimate means of mitigating your tax liabilities, helping you utilise tax exemptions and deductions, and benefits offered by the government.

Lowering the tax liability, ensuring financial stability, and boosting the productivity of your earnings are some of the assured benefits of tax planning.

While women enjoyed lower taxation previously, now the tax slabs are equivalent for both genders.

Save taxes by investing

Women can save on tax outflows by parking funds in tax-saving instruments like Public Provident Fund (PPF), National Pension System (NPS), Equity-Linked Savings Schemes (ELSS), fixed deposits (FDs), life insurance, health insurance, etc.

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ELSS is an especially popular instrument given the short lock-in periods (three years) and potentially better returns. With the earnings and maturity proceeds on ELSS being tax exempt, as long as you maintain the lock-in period, ELSS funds can help you create long-term wealth.

Even as you chart a fulfilling career journey and live up to your ideals of a working woman, it is important to manage your finances and tax plan to ensure that you can maintain your lifestyle in the long-term.

(The writer is Head Broking, IIFL Wealth Management)