In this article, I have enumerated the tax benefits available for the payment of education or school tuition fees for children that are part of the salary structure of the salaried individual. Also included is an insight into the additional deductions under section 80C for making investments in children’s education.
The government of India allows tax breaks and income tax exemption on the tuition fees paid by the individual for their children. It must be noted that this deduction is available only on the tuition fees portion of the total fees paid. To promote higher literacy rate and the education of children within India, there are a number of tax benefits which a person can make use of for reducing their taxable income.
Let us discussed here are some of the tax benefits available :
- 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.
(*Only if expenses are incurred in India as per Section 10(14) of the income tax act)
- 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 like development fees and transport fees are not eligible for deduction under Section 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 for 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 with respect to two dependent children and for the fees paid to an educational institution, college or school.
- 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.
- 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: The deduction is available for maximum up to INR 1.50 Lakh for each financial year for each parent respectively. 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.
- Tuition fees paid to an 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 and play schools.
- The deduction is available only on actual payment and not on a payable basis; For instance, if the fee is paid by the parent in April 2017 for the quarter ending March 2017 then the fee paid will be eligible for a deduction in the FY 2017-18.
- The fee can also be claimed by an Unmarried person/ divorced parent.
- An adopted Child’s school fees are also eligible for deduction.
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.
How to claim the tax exemption for Children’s education allowance (u/s 10(14) and deduction for payments made towards tuition fees u/s 80C
The said person will need to 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.