How tax sops can help women enter the workforce and stay there

Higher female participation ca widen the tax base.

Team Deloitte 

A tax policy that addresses gender disparity, ushers in reforms for working women, and institutionalises work-life balance through monetary benefits is crucial for a just and inclusive society.

Such policies align with the trajectory projected for India — one of the fastest growing economies of the world — forecast to expand by 6.5 percent in FY26 despite geopolitical and tariff-related headwinds.

As India scouts for new areas of growth, encouraging more women to join the workforce and promoting women entrepreneurs is a key priority. Per the latest Periodic Labour Force Survey, 43.04 percent women identified domestic commitments (child-care responsibilities and homemaking) as significant barriers to workforce participation. Supportive nudges in the form of a tax policy for women to address extant gender issues and reforms could help lower such barriers.

Also read: Indian women now prioritise retirement and travel as planning for kids’ weddings takes a back seat

Gender disparity and taxation

A recent Deloitte report, ‘The Sheconomy advantage: How tax breaks can fuel India’s women-led growth,’ highlighted how, while women play a significant role in India’s economy, they continue to be financially dependent, and bear the brunt of discrimination and exploitation. For example, the World Inequality Lab shows that female employees in India earn only Rs 40 for every Rs 100 earned by their male counterparts. The steps required  include transparent pay equity, software for improved pay analysis, and training and awareness drives.

A targeted tax policy for women could look at tax exemptions and higher standard deductions for them, especially for single mothers and widows. Tax deductions for employers who recruit women can be another way to have more women to join the workforce. For instance, section 80 JJAA of the Income Tax Act allows corporates 30 percent additional deduction against employee costs, subject to certain conditions.

A leaf can be taken from the US where employers benefit from a work opportunity tax credit amounting to 40 percent of the wages paid (subject to a cap) to people who have encountered barriers to employment. Providing a conducive work environment, childcare facilities, and flexible work hours for women should also be encouraged through tax incentives. Additional tax benefits could be considered for corporates that upskill women after a career break.

Also read: Assets managed by Indian women fund managers double to Rs 13.45 lakh crore in a year

Tax reforms for working women

According to the World Bank, India's female employment rate drops by about 12 percent post marriage. While higher education could be a key mitigating factor, tax exemptions for women who rejoin the workforce after marriage and children will help reduce the number of dropouts. Childcare tax credits / deductions may also help. Globally, tax systems have traditionally been structured around a single earner household, typically with the male being the breadwinner.

Tax benefits and work-life balance

Incentives such as deductions on account of childcare, tax credits for elder care, and tax benefits for maternity expenses  could help women balance their professional and personal lives better. Policies to alleviate poverty must also consider gender inequality and address the constraints.

Gender norms often assign women the role of the homemaker and caregiver, while men are expected to go to work and bring in the bread. These norms influence policies and laws that define access to productive resources such as education, employment, land, and credit.

Inclusive and equitable tax policies will not only improve the lot of women employees and entrepreneurs, but also facilitate their participation in policy formation. This is vital as it can transform society,  laws, policies, services, institutions, and social norms. Higher female participation may also widen the tax base. However, the success of tax incentives for women depends on the design and implementation of such policies.

(Authored by Tehmina Sharma, Partner, Deloitte India, Ramsurya Mamidenna, Director, Deloitte India andRakhi Modi, Associate Director, Deloitte India)

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