A foreign truth: Have a child, halve your tax

MUMBAI: Can you imagine getting a tax deduction for having a child? Certainly not in India. But most emerging markets including Taiwan, Malaysia, Thailand, and even developed ones like Hong Kong, offer a host of deductions not only for being married but also for having children and even dependants.
This usually helps bring down tax liability to much lower slabs. In Malaysia, for instance, an individual earning a salary equivalent to Rs 4 lakh in India would get around RM 71,360 (after adjusting for PPP and exchange rate), thus falling under the tax bracket of 25%.
However, he is also eligible for a personal deduction of RM 8,000 for himself and RM 3,200 for each child receiving full-time education.
In addition, he would get deductions up to RM 5,000 for life insurance premiums, RM 5,000 for medical expenses for parents and up to RM 3,000 for medical premiums. As a result, his taxable salary would be reduced and fall in the 15% bracket.
Likewise, Taiwan offers a personal exemption of NT$ 74,000 each for the taxpayer, his spouse and each dependent, in addition to a standard deduction of NT $44,000. After these deductions, a person earning an equivalent of Rs 4 lakh, that is NT $7,41,750, comes under the 13% tax bracket. Besides, there are special deductions available for income from certain investments and for wage and salary earners.
In Thailand, a similar individual would earn Baht 5,28,976, falling under the tax bracket of 20%. However, after making deductions such as Baht 30,000 each for man and wife and Baht 15,000 for each child, education allowance of Baht 2,000 per child, life insurance allowance of Baht 10,000 and so on, he would face a marginal tax rate of 10%.
In a developed country like Hong Kong, there are many deductions. Although the same individual would fall in the highest tax slab of just 17%, a generous dose of deductions would bring his tax liability down.
The person would get a personal allowance of HK$1,08,000 if single and HK$ 2,16,000 if married. In addition, he gets an allowance of HK$30,000 for each child and HK$60,000 for each dependent parent.
All these allowances are allowed up to the point where a minimum standard rate of 15% becomes applicable.
In Singapore, although the individual would fall in the 15% slab for earning S$76,000, his tax liability gets reduced by various allowances.
There is an allowance of S$3,000 for an individual, S$2,000 for his wife, $2,000 relief per child and S$5000 for each dependent relative, as well as deductions for life insurance premiums and contribution to approved pension funds.
This takes the income down to the 12% slab. Singapore has many slabs ranging from 3% up to a maximum of 26%.
In China too, an individual is allowed a flat RM 800 deduction each month in computing his or her net taxable return, while in Japan there is a deduction of Y3,80,000 each for man and wife and Y3,80,000 for each dependent. In addition, there is a basic deduction of Y3,80,000. Indonesia too allows a standard deduction of 5% of gross income up to a maximum of 12,96,000 rupiah a year, besides personal allowance for self, spouse and every dependent.