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

1. Exemption for Children’s education and Hostel Expenditure

Following exemption* is provided to an individual employed 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.
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(*Only if expenses are incurred in India as per Section 10(14) of the income tax act)

2. Deduction of payment made towards Tuition Fees under section 80C

A parent can claim a deduction on the amount paid as tuition fees to a university, college, school or any other educational institution. Other components of fees like development fees and transport fees are not eligible for deduction under Section 80C.

The maximum deduction on payments made towards tuition fee can be claimed for up to Rs 1.5 lakh together with the deduction with respect to insurance, provident fund, pension etc. in a financial year.

3. Eligibility of tuition fees for claiming deductions under Section 80C

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

• Who is eligible: This deduction is available only to an individual parent or guardian or sponsor.

• How many Children?: The deduction is available to a maximum of 2 children for each individual. Therefore, a maximum of 4 children’s deduction can be claimed, i.e. 2 by each parent.

• Maximum Limit: Each parent can claim a deduction of up to Rs 1.50 lakh separately every financial year. Please note that the aggregate amount of deduction under section 80C, 80CCC and 80CCD shall not exceed INR 1,50,000 for the individual parent.

• Deduction is available irrespective of the class attended by the child. However, the institution, college or university must be situated in India, even if affiliated to a foreign university.

• The deduction is available only for full-time education courses that include nursery school, creches and play schools.
• 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 2019 for the quarter ending March 2019 then the fee paid will be eligible for a deduction in the FY 2019-20.

• The fee can also be claimed by an Unmarried person/ divorced parent.

• An adopted Child’s school fees are also eligible for deduction.

4. Non-eligibility of payments towards tuition fees

• Deduction is not available for payment made towards Development fees, donation or charity, Private Coaching center, other expenses such as hostel expenses, mess charges, library charges or similar payments.
• Deduction is not available for payment made towards part-time courses.

• 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 is not eligible for this deduction.

5. How to claim tax exemption for Children’s education allowance (u/s 10(14) and the deduction for payments made towards tuition fees under Section 80C

Submit the receipt issued by the schools for the payment made during the financial year to their employer.They must also show it in form 12BB before submitting the proofs of investments at the end of the Financial year.
For an individual other than a salaried employee, you will have to claim the deduction under VI-A schedule by showing the amount of fees paid under section 80C on the income tax return.
It is important to mention here that children’s education allowance i.e part of the salary structure, and fees paid towards tuition fees of the Children are both different deductions. These, therefore, can be claimed separately within the limit prescribed (as mentioned above) as per the provisions of the Indian Income Tax Act, 1961.

Whether reimbursement of 3rd child is permissible if not CEA is not claimed for 1st and 2nd child?

No, reimbursement on children education allowance is not allowed for 3rd child if not claimed for 1st and 2nd.

If I have adopted a child, so am I eligible to claim CEA deduction?

Yes, adopted child’s school fees are also eligible for deduction.

Whether hostel expenditure allowance can be reimbursed if the child is staying in a hostel which is not a part of residential school in which he is studying?

No, hostel expenditure allowance can be reimbursed only if the child is staying in a hostel which is a part of residential school in which he is studying.