India: Taxing Indian Woman ©

Last Updated: 21 January 2002
Article by Ro Nirmala

Co-written by Mr R S Nambi

Introduction:

According to the recent census, the statistics reveals that women occupy nearly 50% of the total population in India. Most of these women have remained as housewives and in modern times due to their educational background and economic necessities, have opted out for service and thus have become additional earning members for the family. According to one of the study on the computation of average per capita income in India, a view has been expressed that one has to impute the value of the economic contribution made by a housewife. In the view of the critic of the above study, the per capita income would improve significantly under Indian situation if the contribution of the housewife had been factored in. Be that as it may, the significant contribution made by Indian women remaining indoors for the economic prosperity of her family cannot be denied. Due to modernity, these women have come forward in the open to prove their mettle and have actually shown remarkable progress over their male counterparts. The fact that the women have waged a lonely battle in this male dominated world has to be acknowledged by the historians. Even though the Government has been promising of proper representation for women and also promises to allocate resources for the development of the economic lot of the women, in the authors’ view, very little has been demonstrated by the Government in action. In this article, the authors traverse through the Indian taxation in an attempt to find out whether the Government has been considerate towards women in taxation of their income, expose the weakness in the present system of taxation and suggest the various issues for the policy makers to be considered in addressing the issues of gender equality.

Taxation of income:

The women living in the state of Goa and in the union territories of Dadra, Nagar Haveli, Daman and Diu are governed by a system of community of property in force in those places and the income of the husband and the wife under any head of income other than the head "salaries" shall not be assessed as that of such community of property, whether treated as association of persons or body of individuals. The above income shall be apportioned equally between the husband and the wife and shall be included separately in the total income of the husband and the wife respectively. The remaining provisions of the Income Tax Act shall apply after the above computation of individual income. In other words, the Portuguese laws have conferred equal rights for women and men in the income earned out of any community of properties.

A woman, who has not crossed 65 years of age and has income by way of "Salaries" or "Business or profession" or from any investments, is eligible for a special tax rebate from the gross income tax payable by her upto Rs.5000/- under the provisions of section 88C. However the woman has to be a resident for claiming this relief.

There is no distinction between the tax treatment of a woman employee and a male employee. A woman may be a director or a senior officer or a junior employee in any proprietorship or partnership or company or any other organization or with central Government or state Government or a local authority. A standard deduction of 1/3rd of the income or Rs.30000/- whichever is lower where the income does not exceed Rs.150000/-, Rs.25000/- where the income does not exceed Rs.300000/-, Rs.20000/- where the income does not exceed Rs.500000/- and NIL where the income exceeds Rs.500000/- is allowed in computing the tax liability under the head "salaries."

The Income tax Act provides that where the woman is employed in a concern owned by her husband, her income is treated as NIL and any income paid to her directly or indirectly by way of salary, commission, fees or any other form of remuneration, whether in cash or in kind would be added to the income of her husband. This is true of any sole proprietary concern or in any concern where the husband has got substantial interest. However if the woman has professional qualifications or has been paid according to the market rates based on her technical qualifications and the remuneration has direct relationship to the technical / professional knowledge and experience, the income earned by her would be taxed in her hands only.

In applying the provisions of the Income tax Act, if the wife earns a higher income than that of the husband without factoring in the implications of Section 64(1)(ii), the income of the husband on the other hand would be added to that of the wife. Similar is the case in respect of clubbing provisions for the income of the minor child under section 64.

If the woman derives any gift from her husband, the income from such gifts is taxed in the hands of the husband under the clubbing provisions. In other words, the Income tax Act does not permit any gifts out of love and affection between the husband and the wife. The situation is true even if the assets are transferred to a third person for the immediate or deferred benefit of the spouse. Similarly the Act discourages any transfer of property to the minor child except where the minor child suffers from permanent physical disability including blindness or is subject to mental retardation, which impairs their earning capacity.

The clubbing provisions recognizes the gift made to the would-be-daughter in law out of love and affection and exempts any income earned by the daughter in law out of such transferred assets. This is an area for tax planning.

The Income tax Act also encourages the co-ownership of the property between the husband and the wife in taxing the income from such properties. However the Act expects such arrangement to be made legally transparent and the document should explicitly make their respective shares definite and ascertainable. This is yet another area of tax planning as the income from properties in such type of arrangements has to be computed individually. To make things simpler, both the husband and the wife can claim relief upto a maximum of Rs.150000/- each in their assessments as interest on housing loan.

Issues for the consideration of the policy makers:

  1. It is generally understood that a woman requires protection and looks for economic security. Before her marriage, the security is provided by the parents, after the marriage, by her husband and in her old age by her own accumulated wealth arising out of gifts from her parents before or at the time of her marriage or after her marriage or gifts from her husband. However the Act discourages such gifts through clubbing provisions. When the country’s population comprises of 50% by women, is it not fair to expect the Government to provide fiscal incentives with the objective of economically liberating women in sharing the family assets? Nowadays the women are excelling in the field of education and are emerging as toppers and the days may not be distant when the
  2. women become the major breadwinners for the family. When such a situation turns into a reality, the women would be forced to pay more tax because of the clubbing provisions. This would be highly unfair to the fair sex.

  3. Section 88C of the Act which provides tax rebate for women not exceeding 65 years of age, restricts the relief only to women who are Resident in India. Any intelligent person may not be able to appreciate the above restriction, as there are more women under the NRI category. Further a woman needs economic protection only when she becomes aged. Therefore the restriction on the grounds of age factor should also be removed. This would enable aged women to claim additional relief under section 88C in addition to the relief provided for senior citizens.
  4. If the Government is seriously committed to the economic uplift of the women, the Government should consider providing tax relief in respect of any business or profession owned or run by a woman entrepreneur through tax holidays. Now the concept of tax holidays is provided only based on location of an industry and is linked to the investment criteria. In order to provide relief to agriculturalists, the agricultural income is considered only for rate purposes. This would be a much better allocation of economic resources based on proportional representation of population mix than the present system of providing allocations based on caste factor. It is proved beyond doubt that the existing system of providing fiscal relief based on caste factor has not benefited the targeted population.
  5. It is also proved by statistics that a woman in India does not enjoy the same state of health as that of her western counterparts. Therefore would it not be prudent to provide extra tax relief for women when more insurance products are made available in the market providing for medi-care of women in the country?

Conclusion:

In the opinion of the authors, the women in India have battled their way up from the back yards of a family to the forefront of being a breadwinner and taxpayer today. They have silently contributing to the economic uplift of the family based on their inherent abilities and knowledge in the past. In today’s world, more and more women are becoming educated and scaling up the corporate ladder. The entrepreneurial urge in a woman is also on the increase. Thanks to the freedom of expression, many women are articulating their rights in appropriate forums and reminding the Government and policy makers of their duties and obligations in encouraging the economic lot of the women. It is against this perspective, the article has been written and the authors would encourage readers’ participation of the views expressed in this article. It is also hoped that the NGOs and other women’s welfare organizations would take up the cause further with the policy makers and the authors would feel immensely happy even if they achieve some success.

© Copyrights reserved by RSN & Associates, Chartered Accountants, Chennai, India.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.

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