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Resource centre on India's rural distress
 
 

India can learn from others, tax policies should boost women empowerment-Lubna Kably
-The Times of India

The Companies Bill, 2012, passed by the Lok Sabha a few months ago, has recognised the importance of diversity in the board room. Certain class of companies will soon be required to have at least one woman director on board. The EU has long recognised the value that women directors bring to the table.

But, policies need to be reworked even at the ground level. With the budget around the corner, the time is just right for some rethinking which will boost empowerment of women at the workplace, or provide for greater women security.

Higher tax exemption limits: The Equal Remuneration Act, 1976, guarantees equal pay for equal work, but ground realities are a bit different. A survey by the World Economic Forum in 2009 not only pointed out wage gaps between men and women, but also showed that most women employees were present only at the entry and middle levels of management. It was difficult for them to break the glass ceiling. For this year, India's rank was a poor 127 out of 134 countries in relation to the Economic Participation and Opportunity Gender Gap Sub-index. Three years later in 2012, there hasn't been much improvement, with India's ranking standing at 123 out of 135 countries, in respect of this particular parameter.

Career women in India, not only face the issue of wage disparities, but are also forced to take career breaks or work part time, as they solely or largely bear the share of household responsibilities.

"Given the social pattern in India and the cultural ethos, a better tax treatment for women is justified," states Nikhil Bhatia, executive director, PricewaterhouseCoopers

India and Pakistan were probably the only two countries that provided for a higher income tax exemption limit for women. While Pakistan abolished this differential in 2010, two years later in last year's budget India followed suit.

"Perhaps the exemption limit for certain categories of women, whose gross total income (be it from employment, vocation or a business enterprise) could even be twice that of the general exemption limit, which is currently Rs. 2 lakh. Whereas those earning above a certain threshold need not be given the benefit of this differential exemption limit to deter misuse," adds Bhatia.

"Tax policies can provide for a standard deduction against the taxable salary income or professional/business income if the woman is self-employed," states Sonu Iyer, partner, Ernst & Young. Incidentally, financial year 2004-05 was the last year where standard deduction was available to both genders against salary income. For salary income up to Rs. 5 lakh the standard deduction was a maximum of Rs. 30,000 for higher salaries the cap was Rs. 20,000.

Offering suitable tax deductions: India can borrow a leaf from many countries. Singapore has specific 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 appx) per year. It is based on a percentage of the mother's income and this percentage increases with the number of children. Of course given the population of India, the mother's child relief, could be restricted to two children. In Singapore, 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 appx) as a deduction. Even a foreign maid deduction is available. Back home in India, there is no such deduction available. Wouldn't it be nice to be able to deduct your bai's salary?

Some countries like South Korea, do recognise that women may also have to be the head of a household. If they are and have dependents, women tax payers get an additional exemption of Korean Won 500,000 (Rs. 25,000 appx).

Getting back to work: Many women are returning back to the workforce after a career break. However, neither the employer hiring them nor the women employees themselves get any tax benefits. Malta recognises that women owing to family responsibilities do have to take a career break. When a woman re-joins after a gap of at least five years, she can claim a tax credit of a little over Euro 1,000 (Rs. 73,000 appx) for two consecutive years. Malaysia aims to attract professional women on a career break to return to the workforce. From January this year, eligible companies will enjoy a double tax deduction on training expenditure incurred for women who have been hired after a career break. In Italy, a higher deduction from regional tax is available to a company, if it hires women employees.

"Indian tax laws could be amended to allow a higher weighed deduction of say 130% of the salary cost of new women employees. A similar provision exists for employment of new workmen and it is available to the employer for three consecutive years," states Sonu Iyer.

Property matters: 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.

For instance, the stamp duty charges in Delhi are 6% if the property is registered in the name of a male buyer, 5% for joint registration and 4% if the property is registered solely in the name of a woman.

Naushad Panjwani, Sr Executive Director, Knight Frank (India) states: "While such differential stamp duty rates could be adopted by other States also, to prevent abuse the State level rules could provide that if the property is sold prematurely, within say five years, the discount availed off earlier, would have to be paid at the time of sale. Under certain exceptional circumstances such premature sale on husband's demise or divorce, this payment should be waived off."

Under income tax laws, if a 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 without consideration, 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.

Recognising the need for such 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% is available. The balance, after deducting expenses such as interest on housing loan, is taxed as income from house property. The flat deduction could be raised to 50% if the property is solely registered in the wife's name."