Tax benefits on child education

Tax benefits for spending on children’s education. All you need to know

In the previous article, we discussed how to finance a child’s education post-pandemic? In this article, we will discuss tax benefits of spending on a child’s education.

The income tax department has a particular framework for specific allowances and exemptions that you can claim on the money you earn in a financial year.  

One such allowance is your child’s education allowance. Everyone who plans to pay tax under this category should be aware of a lot of relevant information.  

Because children’s education is a significant financial investment for a parent, there are various benefits available to taxpayers. 

For some salaried individuals, paying school or education fees for children can be a part of their salary structure. Let us also discuss the additional deductions available under section 80C of the Income Tax act of 1961.  

Deduction of payment made towards Tuition fees under section 80C  

A parent can deduct the amount paid to a university, college or school, or other educational institution as tuition fees.  

Other fees, such as development and transport, are not eligible for section 80C deductions. In a financial year, the maximum deductions on tuition price payments, coupled with other deductions for insurance, provident fund, pension, and other expenses, is Rs 1.5 lakh. 

Eligibility of tuition fees for claiming this deduction

Only a single parent, guardian, or sponsor is eligible for this deduction for each individual; the deduction can be for a maximum of two children. As a result, four children’s deductions can be used by two parents each.  

Every year, each parent can claim a deduction of up to Rupees 1.5 Lacs in total. Please note that the total deduction amount under sections 80C, 80CCC, and 80CCD for each parent cannot exceed INR 150 000.  

Deductions are available regardless of whatever class the child attends. Even if connected with a foreign university, the institution or college must be located in India only. The deduction is available only for full-time educational courses. 

The deduction is allowed only on a paid basis, not on a payable basis. For example, if a parent pays a fee in April 2020 for the quarter ending March 2020, the price will be eligible for a deduction in FY 2020-21. 

tax benefits
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Non-eligibility of payment towards tuition fees

Payments towards development fees, donations to charities, private coaching centers, or other expenses such as hostel expenses, mess charges, library charges, or similar payments are not eligible for a deduction.  

It is impossible to claim a tax deduction for fees paid for part-time courses. School fees paid for spouse, self, brother, sister, mother, or any other relative than children are not eligible for a tax deduction. 

Also, fees paid to foreign universities situated outside the geographical regions of India are not eligible for this deduction. 

How to claim the deduction?  

You have to complete a set of actions to claim tax benefits on tuition fees, and the methods outlined below will assist you in collecting your tax benefit.  

To the employer, submit the receipt produced by the educational institution for the payment made in the current fiscal year before providing the proof at the end of the fiscal year.  

Show the tuition fee paid in form 12BB. When submitting an income tax return, unsalaried individuals must claim the deduction under the VI-A schedule by demonstrating the fee paid under section 80C.  

Note that the educational fee allowance under section 10(14) and the deduction for tuition fees under section 80C are not the same. The prescribed limits can claim the two different provisions under the Income Tax Act of 1961.  

Tax deductions can help you save money during your child’s early years of education. Also, you must not forget to develop a long-term strategy for higher education.

Consult an expert advisor to get the right plan for you

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