Tax Benefits on Education Allowance under Income Tax Act

There are a variety of tax perks available in India to promote greater literacy rates and children’s education. These benefits can be used to reduce taxable income. The Indian government provides tax reductions and exemptions on tuition fees paid by individuals for their children.

Payment of education or school tuition fees for children may be included in the remuneration structure of some paid individuals. Let’s also discuss the additional deductions available for the same under section 80C.

Exemption for Children’s education and Hostel Expenditure

An individual working in India are entitled to the following exemptions:

• Children’s Education Allowance: INR 100 per month, up to a maximum of two children.
• Hostel Expenditure Allowance: INR 300 per child each month, up to a maximum of two children.

Deduction of payment made towards Tuition Fees under section 80C

A parent can deduct the amount paid to a university, college, school, or other educational institution as tuition fees. Other fees, such as development and transportation fees, are not eligible for Section 80C deductions.

In a financial year, the maximum deduction on tuition price payments, coupled with the deductions for insurance, provident fund, pension, and other expenses, is Rs 1.5 lakh.

Eligibility of tuition fees for claiming deductions under Section 80C

Persons who pay any amount/fees for their children’s education can claim a tax deduction under Section 80C if they meet specific criteria, which are outlined below:

• Who is eligible? Only a single parent, guardian, or sponsor is eligible for this deduction.
• How many Children? For each individual, the deduction is limited to a maximum of two children. As a result, a total of four children’s deductions can be claimed, two by each parent.
• What is the Maximum Limit? Every financial year, each parent can claim a deduction of up to Rs 1.50 lakh. Please note that the total amount of deductions under sections 80C, 80CCC, and 80CCD for each parent cannot exceed INR 1,50,000.
• Deductions are available regardless of whatever class the child attends. Even if connected with a foreign university, the institution, college, or university must be located in India.
• Only full-time education courses, such as nursery school, creches, and playschools, are eligible for the deduction.
• The deduction is only allowed on a paid basis, not a payable basis. For example, if a parent pays a fee in April 2020 for the quarter ending March 2020, the fee will be eligible for a deduction in FY 2020-21.

An unmarried person/divorced parent can also claim the fee.

The school fees of an adopted child are also deductible.

Non-eligibility of payments towards tuition fees

• Payments are given towards development fees, donations to charities, private coaching centres, or other expenses such as hostel expenses, mess charges, library charges, or similar payments are not eligible for a deduction.
• Payments for part-time courses are not eligible for a deduction.
• Payments for school fees for yourself, your spouse, your brother or sister, your father or mother, or any other relative are not eligible for a deduction.
• This deduction does not apply to fees paid to a foreign university located outside of India.

How can I claim the tax exemption for the Children’s Education Allowance (u/s 10(14) and the Section 80C deduction for tuition fees paid?

Submit to their employer the receipt produced by the schools for the payment made during the fiscal year. They must also show it on Form 12BB before presenting investment evidence after the fiscal year. If you are not a salaried employee, you must claim the deduction under the VI-A schedule by submitting an income tax return with the amount of fees paid under section 80C. It is vital to note that the children’s education allowance, which is a part of the wage structure, and the expenses paid toward the children’s tuition costs are two separate deductions. As a result, these can be claimed individually within the limits set down in the Indian Income Tax Act, 1961 (as indicated above).

What exactly does the 80C deduction under Chapter VI A imply?

When a taxpayer makes certain investments or eligible expenditures allowed under Chapter VI A, the IRS permits the person to reduce his or her taxable income. PPF, EPF, LIC premium, Equity-linked saving scheme, principal amount payment towards home loan, stamp duty and registration charges for property purchase, Sukanya Samriddhi Yojana (SSY), National Saving Certificate (NSC), Senior Citizen Savings Scheme (SCSS), ULIP, tax saving FD for 5 years, Infrastructure bonds, and other investments are all eligible for deduction under Section 80C.