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The tax system in India is gender-neutral, where women and men are taxed equally on their respective incomes. Previously, women enjoyed tax relaxation on their income, but from FY 2012-13, gender-specific tax relaxations have been removed.
Tax* in India is equal to men's and women’s income, and largely, the tax system is gender-neutral. People belonging to any gender running a business pay corporate tax and income tax. Everyone pays the GST@ or Goods and Service Tax — the producers and the consumers.
However, this does not mean you cannot enjoy any tax deductions as a female business owner. Being covered under the same tax rules, women entrepreneurs are entitled to the same tax deductions available under the Income Tax Act.
If you are interested to know what are the tax benefits of female-owned businesses, keep reading this blog. Here, we have also mentioned some tax deductions for women-owned businesses. These schemes have been introduced to encourage women entrepreneurship.
Tax Benefits for Woman-Owned Businesses
As we have mentioned already, women-owned businesses do not enjoy any exclusive tax benefits. However, women running their own businesses can save tax using conventional methods allowed by the Income Tax Department.
Women entrepreneurs can claim tax benefits under section 80 of the Income Tax Act for expenditures like:
- Gross earnings
- Business loans
- Insurance policy premium
- Property purchase
Tax Benefits that Women Entrepreneurs Can Claim
Section 80C
Women business owners can claim tax deductions of up to ₹1.5 lakhs per financial year from their total income. The deductions are allowed under Section 80C for a financial year and for investments made towards the following:
- National Savings Certificate
- PPF (Public Provident Fund)
- Employees Provident Fund
- National Pension Scheme
- Equity Linked Savings Scheme (ELSS)
- 5-Year Tax-Saver Fixed Deposits
Section 80E
If a woman entrepreneur takes a loan to finance higher education for herself or her spouse or children, she can claim tax deductions. The female taxpayer can claim a deduction on the interest component of the monthly EMI paid towards loan repayment.
Section 80CCG
If you earn a gross annual income of up to ₹12 lakhs and have never invested in equity, you can secure tax exemptions on your first equity investment. Rajiv Gandhi Equity Saving Scheme (RGESS) allows a tax deduction on 50% of your first-time equity investment amount, not exceeding ₹50,000.
Suppose your total taxable income is ₹6,00,000 per annum, and you invest ₹50,000 in equity2. Under RGESS, you will be entitled to a tax deduction on ₹25,000. So, after the investment, your total taxable income will be ₹5,75,000.
Apart from these sections, you can claim tax benefits under —
- Section 24 that allows a tax deduction of up to ₹2 lakhs per assessment year on interest paid towards a home loan.
- Section 80EEA that allows tax deduction of up to ₹1.5 lakhs per assessment year for paying a home loan for property worth not more than ₹45 lakhs (stamp value).
- Section 80D that allows a tax deduction for paying health insurance premiums for self/dependant children/parents.
- Section 10(10D) allows tax exemption on the sum assured and accrued bonus3 received through a life insurance policy claim.
Tax Benefits for Women on a Business Loan
If you are repaying a loan that you took for business-specific needs, you can avail of tax deductions by writing off the interest payable as business expenditure. However, this tax deduction is only available on the interest component of the EMI payments.
Conclusion
Recently, the W20 Communique 2023 has urged G20 leaders to provide a minimum 15% tax break, or other equivalent incentives, for tech or tech-enabled startups led by women. While this has been proposed, it awaits a decision from the global leaders.
There are no female-owned business tax breaks in India, but women entrepreneurs get special loan facilities from the government and can avail of the gender-neutral tax deductions specific to them under the ITA.
