A tax policy designed to tackle gender inequality, implement reforms for working women, and establish work-life balance through financial incentives is essential for fostering a fair and inclusive society.

Such initiatives are in line with India’s projected growth trajectory, as it stands to be one of the fastest-growing economies globally, with an anticipated expansion of 6.5 percent in FY26, despite facing geopolitical and tariff challenges.

As India seeks new avenues for growth, prioritizing the inclusion of more women in the workforce and supporting women entrepreneurs is vital. According to the latest Periodic Labour Force Survey, 43.04 percent of women cited domestic responsibilities, such as childcare and homemaking, as major obstacles to their participation in the workforce. Implementing supportive measures through tax policies aimed at addressing existing gender disparities could significantly reduce these barriers.

Gender inequality and taxation

A recent report by Deloitte, titled ‘The Sheconomy Advantage: How Tax Breaks Can Fuel India’s Women-Led Growth,’ emphasizes that while women are integral to India’s economy, they often remain financially dependent and face discrimination and exploitation. For instance, data from the World Inequality Lab reveals that female employees in India earn only Rs 40 for every Rs 100 earned by their male counterparts. To address this, measures such as transparent pay equity, enhanced pay analysis tools, and training initiatives are necessary.

A focused tax policy for women could include tax exemptions and increased standard deductions, particularly benefiting single mothers and widows. Additionally, offering tax deductions to employers who hire women could encourage greater female workforce participation. For example, Section 80 JJAA of the Income Tax Act provides corporates with a 30 percent additional deduction on employee costs, subject to specific conditions.

A model can be drawn from the United States, where employers can take advantage of a work opportunity tax credit that offers 40 percent of wages paid (up to a certain limit) to individuals facing employment challenges. It’s also essential to promote a supportive work environment for women by providing childcare options and flexible hours, incentivized through tax breaks. Furthermore, additional tax advantages could be introduced for companies that invest in reskilling women returning to the workforce after a career hiatus.

Tax reforms aimed at supporting working women

The World Bank reports that in India, the female employment rate declines by approximately 12 percent after marriage. While pursuing higher education can help mitigate this trend, offering tax exemptions for women who re-enter the job market after marriage and childbirth could significantly lower dropout rates. Childcare tax credits or deductions could also play a crucial role. Historically, tax systems worldwide have favored single-income households, often with men as the primary earners.

Tax incentives and achieving work-life balance

Incentives like deductions for childcare, tax credits for elder care, and maternity expense benefits can empower women to better manage their professional and personal responsibilities. Efforts to combat poverty must also take gender disparities into account and address existing barriers.

Cultural norms frequently assign women the roles of homemakers and caregivers, while men are expected to be the primary earners. These societal expectations shape policies and regulations that govern access to essential resources such as education, employment, land, and credit.

Implementing inclusive and fair tax policies can enhance the situation for women in the workforce and as entrepreneurs, while also encouraging their involvement in policy-making processes. This is crucial for driving societal change, influencing laws, policies, services, institutions, and social norms. Increased female participation could also expand the tax base. However, the effectiveness of tax incentives for women hinges on how well these policies are designed and executed.