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

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In this article, we have enumerated the tax benefits available for payment of education or school tuition fees of children that are part of the salary structure of the salaried individual as well as taking an additional deduction under section 80C for making investments in children education.

The government of India allows tax breaks & income tax exemption on the tuition fees paid by the individual for their children. It must be noted that deduction is available only on the tuition fees part of the total fees paid. To promote higher literacy rate & education of the children within India, there are a number of tax benefits which the person can take for reducing their taxable income. Discussed here are the tax benefits available :

  1. Exemption for Children education & Hostel Expenditure
  2. Deduction of payment made towards Tuition Fees under section 80C
  3. Eligibility of Tuition fees for claiming deduction u/s 80C
  4. Non-eligibility of payments towards Tuition fees
  5. How to claim the tax exemption for Children education allowance (u/s 10(14) & deduction for payments made towards tuition fees u/s 80C

Children Education Allowance

1.Exemption for Children education & Hostel Expenditure

Following exemption* is provided to an individual employed in India:

  • Children 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)

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

In respect of education, a parent can claim a deduction on the amount paid as tuition fees to any university, college, school or any other educational institution. Other components of fees such as development fees, transport fees are not eligible for deduction u/s 80C. Only tuition fees that forms part of the total fees paid is allowed for deduction.

The maximum deduction on payments made towards tuition fee can be claimed up to INR 1.50 lakh together with the deduction in respect of insurance, provident fund, pension etc. in a financial year.

It can only be claimed in respect of two dependent children and for fees paid to an educational institution, college or school.

3.Eligibility of Tuition fees for claiming deduction u/s 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: Deduction is available only to an Individual.
  • How many Children?: Deduction is available to a maximum of 2 children for each individual. Therefore, a maximum of 4 children deduction can be claimed, i.e. 2 by each parent.
  • Maximum Limit:Deduction is available maximum up to INR 1.50 Lakh for each financial year for each parent respectively. Please note that aggregate amount of deduction under section 80C, 80CCC and 80CCD shall not exceed INR 1,50,000 for the individual parent.
  • Tuition Fees Paid to affiliated Educational institution, University, College, School within India: Deduction is available irrespective of the class attended by the child. But, the university must be situated in India. It can be affiliated to any foreign university.
  • The deduction is available only for full-time education courses that include Nursery School, Creches & play schools.
  • Deduction is available only on actual payment and not on the payable basis: For example, if fees is paid by the parent in April 2017 for the quarter ending March 2017 then fee paid will be eligible for deduction in FY 2017-18.
  • Fee can even be claimed by Unmarried person/ divorced parent.
  • Adopted Child’s school fees are also eligible for deduction.

Did-You-Know

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.
  • Late school fees paid is also not eligible for deduction.
  • Fees paid to a foreign university situated outside India would also not be eligible for deduction.

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

The person would need to submit receipt issued by the Schools for the payment made during the financial year to their employer & also show in form 12BB before submitting proofs of investments at the end of the Financial year.

For an Individual other than salaried employee, you would 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 education allowance i.e part of salary structure & fees paid towards tuition fees of the Children are both different deductions &, therefore, can be claimed separately within the limit prescribed(as mentioned above) as per the provisions of the Indian Income-tax Act, 1961.

 

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