Introduction to Children Education Allowance

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.


Educational Allowances as per Section 10(14) of the Income Tax Act, 1961

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.

  • Children’s Educational Allowance: An allowance of INR 100 per month is allowed per child for up to two children studying in an educational institution.
  • Hostel Expenditure Allowance: An allowance of INR 300 per month per child for up to two children is given for those staying in hostels.

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.


Types of Fee reimbursable under Section 10(14)

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:-

  • Tuition Fee
  • Admission Fee
  • Special Fee charged for electronics, music, or any other subject
  • Practical Fee
  • The fee that is paid for the use of any appliances or any form of aid.
  • Library Fee
  • Other related fee charges

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:-

  • One Set of Textbooks and Notebooks for the current study year
  • Two sets of uniforms prescribed by the school
  • A pair of shoes

All of the above-mentioned things are reimbursable within an academic year.


Eligibility Requirements for Children

  • No Minimum age is prescribed for claiming reimbursement of Child Education Fee(CEA) with respect to children admitted in nursery classes. While for physically challenged or specially-abled children there used to be a minimum age barrier of 5 years for vocational training which as of 21st February 2012 stands removed. So there is no minimum age whatsoever for any CEA fee reimbursement claims.
  • The maximum age for any normal child is 20 years for claiming reimbursement under CEA, while the maximum age for specially-abled children is 22 years.
  • * All of the above-mentioned information is in accordance with the information according to O.M. No.12011/07(ii)/2011-Estt. (AL) as dated on 21.02.2012.

Eligibility for School or the Institution your child is studying in

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.


Children Educational Allowance for Employees of the Central Government

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.


Tax Deduction on Tuition Fees under Section 80C

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.


Eligibility for Tuition Fee Tax Deduction under Section 80C

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:
  • Individual Assesses only: This Tax deduction can only be claimed by individual assesses and not by HUF(Hindu Undivided Family) or Corporates.
  • Limit: The maximum permissible limit under Section 80C of the Income Tax Act 1961 is Rs.1.5 lakh with deductions eligible only for two children per assessee. In the case that both parents are taxpayers, they can claim a tax deduction for up to 4 children. Otherwise, an individual assessee cannot claim for more than two children.
  • Child Education Only: Tax Deduction can be claimed towards educating the children exclusively. The fee paid towards educating anyone else, including spouses and the person themselves cannot be claimed as deductions.
  • Full Time Courses Only: Tax deduction on Tuition fees can only be claimed for full-time courses be it school, graduation or post-graduation. The Fee that is paid towards part-time education cannot be claimed as a deduction.
  • Affiliated Institution: The school, college or university the child is studying should have the necessary affiliation from the necessary educational body.

Educational Expenses that cannot be claimed under Tax Deduction

  • A tax deduction is not available towards payment of fees other than Tuition Fee, and these may include Donation Charges, Development Fee, Private Coaching Fee, Hostel Fee, mess charges, Library Fee and henceforth.
  • A tax deduction cannot be claimed against fee paid for part-time courses.
  • A tax deduction cannot be claimed for school fee paid for spouse, self, brother, sister, mother or any other relative other than children.
  • The Fee that is paid to any foreign institution for children’s education is not eligible to be claimed under this deduction.

How to Claim the tax benefit on Tuition Fee paid for Children?

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.

  • Submit the receipt issued by the educational institution for the payment made in the current financial year to the employer
  • Show the Tuition Fee paid in form 12BB before submitting the proof at the end of the financial year.
  • For any individuals other than salaried individuals, they have to claim the deduction under VI-A schedule by showing the fee paid under section 80C during the filing of an income tax return.

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.


Information about Form 12BB and VI-A Schedule

  • Form 12BB is used as a statement of claims by an employee for a Tax deduction.
  • While a salaried employee needs to fill form 12BB and submit to the employer for a Tax deduction before claiming it at the end of the financial year, a self-employed person needs to follow schedule VI-A and claim Tuition Fee Tax deduction under section 80C of The Income Tax Act, 1961.
  • Both Form 12BB and VI-A schedule are used for the same purpose of Tuition Fee Tax deduction.

Conclusions

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.

Frequently Asked Questions

Q- Is the reimbursement on Children Educational Allowance for third child permissible if it has not been claimed for 1st and 2nd child? Because as per OM dated on 2/9/2008 CEA is admissible for two school going children. Does it mean any two school going children?

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.


Q- Can CEA be claimed for a child for the same class twice?

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.


Q- Is there any age limit for reimbursement of CEA with respect to children studying nursery classes?

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.


Q- Is CEA admissible to Government Servant who ceases to be in service due to retirement, dismissal, discharge or removal from service during the course of the academic year?

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.


Q- Will the Children of a Government Service Employee who dies during service be still eligible for CEA reimbursement under the new 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.

CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.