It is said that the most powerful weapon of the future is education, with the right education having the ability to change the way our world functions. This education, is, however not cheap, with the costs skyrocketing, putting additional burden on our finances. According to estimates, basic private education in India can cost around Rs 7,500 per year per child, taking the overall cost of schooling to around Rs 1 lakh per child for 10 years. Higher education and professional courses are even more expensive, with the tuition fee for popular courses going up to Rs 1 lakh per year. All this in essence means that a parent would have to keep sufficient funds to give the best education for their children.
While most parents do not wish to compromise on the education of their wards, financial constraints can become taxing. The government, on its part has special provisions to ensure that taxpayers get tax benefits on the tuition fee paid towards educating their children every year. Individuals are entitled to tax deductions under certain provisions of the Income Tax Act, helping them save tax while providing quality education to their children.
Tax Deduction on Tuition Fees under Section 80C:
Section 80C of the Income Tax Act has provisions for tax deductions on tuition/education fees paid by a parent towards educating his/her children. Taxpayers can avail deductions to a tune of Rs 1.5 lakh under Section 80C (as per 2015-2016 tax slabs), with other investments also eligible for this rebate. Parents can claim the tuition fee paid by them towards their children’s education as deductions, ensuring that they save tax even if they don’t have other tax saving instruments. Parents can claim the actual fee paid by them in a particular financial year.
For example, Mr. Ritesh is a salaried individual with two children, aged 21 and 14 respectively. He pays an annual tuition fee of Rs 50,000 towards his son’s engineering fee and Rs 15,000 for his daughter’s school fee, spending a total of Rs 65,000 per year on educating his children. He can now claim this amount as tuition fee deduction under Section 80C, helping him save a sizeable amount in tax.
Tuition Feed Eligibility for Tax Deduction under Section 80C:
Taxpayers who wish to claim tax deduction on tuition/education fee need to ensure that they satisfy the following criteria.
- Individual Assessee: Tax benefits on tuition fee can be availed only by individual taxpayers, with Hindu Undivided Families or corporates not eligible for deductions.
- Limit: The maximum deduction permitted under Section 80C is Rs 1.5 lakh per financial year, with deductions eligible only for two children per assessee. If both parents are taxpayers, then they can claim deductions for 4 children. An individual taxpayers cannot claim the fee paid towards educating more than 2 children as deduction.
- Child Education only: Deductions are permitted only to the extent of tuition fee paid towards educating the children of a taxpayer. Fees paid towards educating anyone else, including himself/herself or a spouse cannot be claimed as deductions.
- Courses: One can claim deductions on the tuition fee paid towards full time courses only. This includes school fees, fees for graduation or post-graduation courses. Fees paid for part time courses cannot be availed as deductions.
- Affiliated: The school, college or university in which a child studies should have necessary affiliations.
Payments not eligible for Tax Deduction:
There are multiple financial components when it comes to educating your child, right from tuition fee, cost of books and materials, uniforms, building fee, etc. Most educational institutes charge extra amounts for additional services, with their cost running into thousands. As per provisions of Section 80C, only the actual tuition fee paid in a year can be claimed as deductions. Additional costs like donations, private coaching, etc. are not eligible for deductions. Other exemptions include hostel fees, library costs, transportation charges, etc. Similarly, one cannot claim tax deductions on distance education courses.
Tax Deduction on Tuition Fees under Section 10:
Section 10 of the Income Tax Act offers an additional tool for taxpayers to save some of their tax. Under this provision, salaried individual taxpayers are eligible to save tax to the tune of Rs 100 per month per child. This amount can be availed for a maximum of 2 children per taxpayer, which means that an individual taxpayer is eligible for tax exemptions of Rs 200 per month. This amount can be claimed as exemption only in the financial year in which the fee was paid. In addition to this exemption, one can also claim exemption on hostel costs on his/her children. This hostel allowance is capped at Rs 300 per month per child, subject to a maximum of 2 children.
Frequently Asked Questions:
1. Is there an exemption limit on the school/tuition fee?
Yes, as per Section 80C a maximum deduction of Rs 1.5 lakh can be claimed in a financial year (including other investments).
2. When can a taxpayer claim deductions/exemptions on tuition fee paid towards educating his/her child?
A taxpayer can claim deductions only in the financial year in which the tuition fee was paid. This deduction is limited to the actual amount paid.
3. Can a taxpayer claim deductions under Section 80C towards the school fee paid towards an adopted child?
Yes,one can claim tax benefits towards educating an adopted child, provided that an assessee isn’t claiming it for more than 2 children.
4. Can a couple with 3 children claim tax benefits under Section 80C?
Yes, tax benefits can be claimed only if both parents are taxpayers. If only one parent is a taxpayer then benefits can be claimed on the education of only two children.
5. Can a taxpayer claim deductions if his/her child is studying abroad?
No, tax benefits can be claimed only if the child is studying in a recognised institute in India.
6. Can the fee paid for nursery/pre-school be claimed as a tax deduction?
Yes, a parent can claim the nursery/pre-school fee as tax deduction under Section 80C.