Tax Planning

Tax Benefits for Women Entrepreneurs: How to Reduce Tax Burden?

Prajakta Shirish Zoting March 13, 2025

Introduction

Women entrepreneurs in India are making significant strides in business, contributing to the economy while creating employment opportunities. However, managing taxes efficiently is crucial for ensuring profitability and sustainability. The Indian government has introduced several tax benefits, incentives, and exemptions to support women entrepreneurs and reduce their tax burden.

This DIY guide will help women entrepreneurs understand the available tax benefits and implement smart tax-saving strategies while ensuring compliance with Indian tax laws.

1. Understanding the Tax Structure for Women Entrepreneurs

In India, businesses can be structured in multiple ways, including:

Sole Proprietorship (Personal income tax applies)
Partnership Firm (Taxed at 30% on profits)
Limited Liability Partnership (LLP) (Taxed at 30%)
Private Limited Company (Taxed at 22% for new companies under Section 115BAA)

Choosing the right business structure can significantly impact tax liabilities.

2. Special Tax Benefits for Women Entrepreneurs

1. Lower Interest Rates on Business Loans

Various government-backed loan schemes like Mudra Yojana, Stand-Up India, and Annapurna Scheme offer lower interest rates for women entrepreneurs.
Tax Benefit: Interest paid on business loans is deductible as a business expense under Section 37(1) of the Income Tax Act.

2. Presumptive Taxation Scheme (PTS) – Section 44AD

Women entrepreneurs running small businesses with turnover up to ₹2 crore can opt for Presumptive Taxation.
Tax Benefit: Under this scheme, only 6-8% of gross receipts are considered taxable income, reducing tax liability and compliance burden.

3. Section 80C Deductions (Up to ₹1.5 Lakh)

Women entrepreneurs can claim deductions under Section 80C by investing in:
- Employee Provident Fund (EPF)
- Public Provident Fund (PPF)
- Life Insurance Premiums
- 5-Year Fixed Deposits (FDs)
- National Savings Certificate (NSC)
- Equity Linked Savings Scheme (ELSS)

4. Deduction on Home Office Expenses

If running a business from home, expenses like rent, electricity, internet, and maintenance can be claimed as business expenses under Section 37.
Pro Tip: Keep records and bills to justify these expenses in case of tax scrutiny.

5. Section 80D – Health Insurance Deduction

Women entrepreneurs can claim deductions on health insurance premiums:
- ₹25,000 for self and family
- ₹50,000 if covering senior citizen parents

6. Depreciation Benefits – Section 32

Business assets like machinery, office equipment, and computers qualify for depreciation benefits.
Pro Tip: Small businesses can claim higher depreciation under Section 32 for new equipment, reducing taxable income.

7. Tax Exemptions on Government Grants & Schemes

Women entrepreneurs receiving grants under Start-Up India, Stand-Up India, or other government initiatives may enjoy tax exemptions on certain incomes.
Pro Tip: Consult a tax advisor to ensure compliance with grant conditions.

8. GST Benefits for Women-Owned Businesses

Businesses with turnover below ₹40 lakh (goods) or ₹20 lakh (services) are exempt from GST registration.
Women entrepreneurs with turnover up to ₹1.5 crore can opt for the GST Composition Scheme and pay a lower tax rate.

3. Additional Tax Saving Strategies

1. Hire Family Members as Employees

Women entrepreneurs can legally employ spouses, parents, or children and pay them a salary.
Tax Benefit: Their salaries reduce business profits, thereby lowering the taxable income.

2. Invest in Tax-Free Instruments

Income from PPF, tax-free bonds, and dividend income (under ₹10 lakh) is tax-free.
Consider ELSS funds for tax savings and long-term investment benefits.

3. Maintain Proper Books of Accounts

Accurate bookkeeping helps claim deductions efficiently and avoid unnecessary tax penalties.
Using accounting software like Tally, QuickBooks, or Zoho Books can streamline tax compliance.

4. Utilize Section 80JJAA – Deduction for New Employment

Women entrepreneurs hiring new employees with a salary below ₹25,000 per month can claim an additional 30% deduction on their salary for three years.

5. Tax Benefits for Startups (Section 80-IAC)

Startups recognized by DPIIT can claim 100% tax exemption on profits for the first three years.
This benefit is available for businesses with turnover below ₹100 crore.

4. Tax Filing and Compliance for Women Entrepreneurs

1. File ITR on Time

Women entrepreneurs must file ITR before July 31st (or September 30th for audited businesses) to avoid penalties.

2. Advance Tax Payments

Businesses with tax liability over ₹10,000 must pay advance tax in quarterly installments.
Failure to pay advance tax attracts interest under Section 234B and 234C.

3. Maintain Proof of Business Expenses

Keep records of invoices, salary payments, rent receipts, and utility bills.
These documents are essential in case of a tax audit.

Conclusion

Women entrepreneurs can significantly reduce their tax burden by leveraging available deductions, exemptions, and smart tax-saving strategies. By optimizing business structure, claiming relevant deductions, and maintaining proper records, they can ensure maximum tax savings while staying compliant with tax laws.

Key Takeaways:

✔️ Opt for Presumptive Taxation (Section 44AD) to reduce compliance burden. ✔️ Claim deductions under 80C, 80D, and depreciation benefits. ✔️ Utilize government schemes and grants for women entrepreneurs. ✔️ Take advantage of GST exemptions and composition schemes. ✔️ Ensure timely tax filing and advance tax payments. ✔️ Hire family members to optimize tax efficiency.