Tax Benefits on Children Education Allowance, Tuition Fees & School Fees

Education is one of the most important investments that parents make for their children. However, the cost of school fees and related expenses can be a significant financial burden for families. To alleviate some of this financial pressure and to promote literacy, the government offers a tax deduction on tuition fees paid for children. In this article, we will explore the tax benefits offered on children's tuition fee, the eligibility criteria, and how to claim them.

The tax benefits offered on children's education are as follows:

• Children's Education Allowance
• Hostel Expenditure Allowance
• Tax deduction on tuition fees

Exemption for Children's Education and Hostel Expenditure

The following exemption* is provided to a salaried taxpayer in India:

• Children's Education Allowance: INR 100 per month per child up to a maximum of 2 children.
• Hostel Expenditure Allowance: INR 300 per month per child up to a maximum of 2 children.

(*Only if expenses are incurred in India as per Section 10(14) of the income tax act)

Deduction on Tuition Fees under Section 80C

A parent can claim a deduction on the actual amount paid as tuition fees to a university, college, school or any other educational institution for the full-time education of only two children. This deduction is only for payment of tuition fees for full-time education and shall not include any payment towards development fees, donation fees, transport fees, or any similar nature payment that is not eligible for deduction under Section 80C.
In a financial year, individuals can claim a maximum deduction of Rs 1.5 lakh for payments made towards tuition fees, along with deductions for items such as insurance, provident fund, pension, and others.

Eligibility of Tuition Fees Deduction Section 80C

Persons paying any sum/fees towards the education of their children can claim tax deduction under Section 80C, subject to the satisfaction of certain conditions, which have been enumerated below:

• Number of Children: Each parent can claim a deduction up to Rs 1.5 lakh for maximum 2 children separately. Therefore, if both parents are taxpayers, they can claim deductions for a total of 4 children.
• Maximum Limit: Rs 1.50 lakh every financial year. 
  Please note that the aggregate deduction amount under Sections 80C, 80CCC and 80CCD is restricted to Rs 1,50,000 for a taxpayer.
• Maximum Age: No maximum age.
• Tuition fee meaning: Only payment made towards the full-time education of the child. However, all these payments will not be categorised as tuition fees: Development fees, donation or charity, private coaching fee, other expenses such as hostel expenses, mess charges, library charges or similar payments.
• Institution: Any university, college, school or other educational institution situated in India.
• Mode of Deduction: The deduction is available only on actual payment and not on payable basis. For instance, if the fee is paid by the parent in April 2024 for the quarter ending March 2024, then the fee paid will be eligible for a deduction in FY 2024-25.

Non-eligibility of Tuition Fees Deduction Section 80C

• The deduction is not available for payment towards part-time courses.
• The deduction is not available towards payment made for school fees of self, spouse, brother or sister, father or mother or any other relative.
• Fees paid to a foreign university situated outside India are not eligible for this deduction.
   

How to Claim Tax Exemption for Children’s Education Allowance and Tuition fee Deductions?

Individual taxpayers can claim income tax exemption for children's education under Section 10(14) and tuition fees deduction under Section 80C.

For Salaried Individuals

Salaried individuals must submit the fee receipt issued by the schools or institutions to their employer by year end at the time of investment proof submission. They must also declare it in Form 12BB.

For Non-Salaried Individuals

A person who is not a salaried employee can claim only the tuition fee deduction under the VI-A schedule under Section 80C. The non-salaried taxpayers are not required to submit any bill while filing ITR. Nevertheless, they should keep the receipts as evidence to back their claims.

It is important to mention here that children's education allowance, which is part of the salary structure, and tuition fees are both different deductions. Therefore, these deductions can be claimed separately as per the limits discussed above.

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