If your employer provides you children education allowance as a part of your salary structure for the payment of education or tuition fee expenses of your children, you can avail of tax exemption benefits. Further, you can also make tax deduction claims on tuition fee payment of your child under section 80C of the Income Tax Act, 1961.
The IT Act allows claiming tax exemption benefits on the tuition fee portion of the total fees paid for educating your children. The tax benefits provided by the Government of India aim to promote higher literacy rate in the country. This article explains in detail about the numerous tax benefits given on educational expenses of the employee’s children.
Tax Exemption on Education and Hostel Expenditure as per Section 10(14)
Salaried individuals working in India and receiving Children Education Allowance as part of their salary structure are allowed to claim tax exemption on the following expenses:
Children Education Allowance: Fixed education allowance received from the employer is tax exempt upto Rs. 100 per month per child upto a maximum of 2 children.
Hostel Expenditure Allowance: Allowance paid for hostel facilities is exempt from tax upto Rs.300 per month per child upto a maximum of 2 children.
Deduction Under Section 80C for Tuition Fees Payment
Apart from the children education allowance, you can also make tax deduction claims for the tuition fees portion of the payment made towards educational expenses of your child in the financial year for upto 2 children.
Tuition fees paid at the time of admission or any other time to a registered university, college or school based in India for the purpose of full-time education can be claimed for tax deduction under section 80C. The tax deduction benefit on tuition fees payment is available to both salaried and self-employed individuals.
However, it should be noted that section 80C provisions for tax deduction benefits on a wide range of investments such as life insurance premium, PPF, EPF etc. including the tuition fees with a cumulative limit of Rs. 1.5 lakh.
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Education Expenses with no Tax Benefit
There are certain children education expenses that do not provide any tax deduction benefit. These include the following:
Tax deduction benefit is not available on capitation fees, donation fees, development fees, fees paid to private coaching centres, hostel expenses etc. which may be a part of the educational expenses of the children.
Institutions situated outside India whether affiliated to any Indian university or not are also not eligible for claiming the tax deduction.
Since tax deduction can only be claimed on tuition fees paid for educating only 2 children, neither the tax benefit can be claimed for the third child nor it can be claimed for such expenses incurred for education of any other dependant family member such as your spouse, parents and siblings.
Tax exemption on tuition fees is also not available for any part-time courses.
How to make the tax benefit claim on educational expenses for children?
You need to submit the receipt issued by the respective institution during the financial year to the employer. The declaration should also be made in Form 12BB before submitting the proof of investments at the end of the financial year. Self-employed individuals will have to claim the tax deduction under schedule VI-A by submitting the receipt of fees paid.
Note: It should be noted that children education allowance and tuition fees paid are two different things and therefore, can be claimed separately for tax benefits. While children education allowance is tax exempt under section 10(14), the tuition fees paid is tax-deductible under section 80C of the IT Act, 1961.