To promote education and literacy for the population, The Income Tax Department introduced various tax benefits on education that allows you to reduce the amount of your taxable income, thus reducing the payable tax.
The Government of India allows for tax exemption on the tuition fee paid by an individual for educating their children. Moreover, for some salaried individuals, payments of education fee for their children may well be a part of their salary structure.
In this article, we’ll explain in detail the numerous tax benefits extended to individuals for the educational expenses of their children.
As per Section 10(14) of the 1961 Income Tax Act, special allowances are given to salaried individuals for covering the educational as well as hostel expenses of their children.
Note: You can claim this allowance only in the financial year in which the quoted Educational Fee was actually paid.
*The given allowance is provided to a person employed in India only.
** The allowance is provided only when expenses are incurred within India in accordance to Section 10(14) Income Tax Act 1961.
***The Allowances are subject to change as per any future amendments in the Income Tax Act, 1961.
According to OM No. 12011/03/2008-Estt(AL) which is dated at 2.9.2008, the types of Fee that are eligible for reimbursement are:-
However, it should be noted that the above-mentioned charges should be levied by the school directly to the student.
Besides the above-mentioned fee, allowance is also available for the purchase of certain items required for education, these include:-
All of the above-mentioned things are reimbursable within an academic year.
The School institution in question has to be recognized by the Central Government, any State Government or by any UT Government, by any University or a recognized educational authority having jurisdiction over the area where the institution in question is situated. These conditions also apply with respect to the children studying in the two classes prior to class 1, i.e. LKG as well as UKG.
* All the data provided is in accordance to OM No.12011/03/2008-Estt.(AL) dated on 23.11.2009 as released by the Government of India.
The Children Education allowance is payable to “Central Government employees including citizens of Nepal and Bhutan, who are employees of Government of India, and whose children are studying abroad” for their children. However, there is a need for a certificate by the Indian Mission in the specific country confirming the recognition of this educational institution by the educational body which has jurisdiction over the area where the institution is situated.
Apart from Children’s Education fee, a separate Tax Deduction can be claimed on Tuition Fee paid by parents for the education of their children.
This deduction includes any Tuition Fee paid at the time of admission or any other time to a registered School, College or University, which is based in India. This tax deduction can be claimed for the purpose of Full-time education under Section 80C of The Income Tax Act. It should be noted that this particular tax deduction benefit is available for both Salaried as well as Self-employed individuals.
Note: The tax deduction provision provided under Section 80C of The Income Tax act includes wide foray of investments such as life insurance premiums, Public Provident Funds, mutual funds, etc. along with Tuition Fee, all with a cumulative limit of Rs.1.5 lakh.
Tax paying individuals who wish to claim a Tax deduction on Tuition Fee under Section 80C must satisfy the conditions for eligibility given below:-Example:
There is a set of steps that you need to follow in order to Claim tax benefits on Tuition fee, and the following steps will guide you in claiming your tax benefit.
Note: It should be noted that Educational Fee allowance under Section 10(14) and Tax Deduction for Tuition fee under Section 80C are two different provisions which can be claimed according to the prescribed limits under The Income Tax Act, 1961.
If you are an employee of a Govt. recognized company you can claim Children’s Educational Allowance under Section 10(14), as well as Tuition Fee Tax deduction under Section 80C of The Income Tax Act, 1961 and you, should claim them both for more benefits. While the Tax deduction can play an instrumental role in saving money in the formative years of your child’s education, don’t forget to make a long term plan for higher education as well.
According to OM No. 12011/03/2008- Est. (AL) dated 11 .11.2008 Children Educational Allowance would be permissible in the case of more than two children only when the number of children exceeds two as a result of second childbirth being twins or more. Which means that CEA is applicable for the case of 2 eldest surviving children, plus CEA for third or subsequent children will only be permissible in the case of multiple births at the time of second childbirth. Furthermore, CEA can also be claimed for a 3rd child in the case of failure of sterilization operation.
CEA doesn’t depend on the performance of the children in his/her class. Even in the case of failure in a particular class, CEA is still permissible. However, CEA is not permissible in the case if the child enrols in the same class in different school even after passing the class or if he/she leaves in mid-session.
There is no age limit with respect to minimum age (even play school fees) permissible for claiming CEA reimbursement for children in nursery classes. However, there is a maximum age limit for the same, which is stated as 20 years for normal children and 22 years for physically challenged and specially-abled children.
CEA is admissible in such cases until the end of the current running academic year. The payment for the same shall be made by the Government Office in which the under question official used to work before these events and these case as others may be governed by other conditions laid out by the CEA Scheme.
If and when a Government servant dies while in service years, the children education allowance or hostel subsidy will still be admissible to his/her children in observance of other conditions for the grant provided to the spouse of the deceased official is not employed in any of the services of the Central Government, State Government, Autonomous body, PSU, Semi-government organization such as Municipality, Port Trust authority or any other organization that is either partly or fully funded by the Central or the State governments. In cases such as these, the CEA/Hostel Subsidy will be payable to the Children till a time when the employee should have actually received the same, with subject to the condition that other terms and conditions are fulfilled as well. The payment for the case shall be made by the office in which the Government Servant in question had been working prior to his death, and this shall be regulated by the other conditions laid down under CEA Scheme.
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