Tax Exemptions for Education and Tuition Fees

In India, tax incentives are available for tuition and other educational costs. Based on this, deductions of up to Rs. 1.5 lakh may be requested. Varying payments have different eligibility requirements, and some payments are not eligible.

Education is thought to be the most potent weapon of the future, with the capability to alter how our world operates with the proper education. However, the price of this education is growing, adding to the strain on our budgets. The estimated cost of basic private education in India is roughly Rs 7,500 each year for each child, bringing the whole cost of education to about Rs 1 lakh for each child over ten years.

The cost of higher education and professional training is much higher, with popular programmes having annual tuition fees as high as Rs 1 lakh. All of this essentially means that a parent would need to save enough money to provide their kids with the greatest education possible.

Even though the majority of parents do not want to sacrifice their children’s education, financial limitations might be difficult. The government, for its part, puts special rules in place to guarantee that taxpayers receive tax benefits on the tuition they pay each year to help educate their children. Under certain provisions of the Income Tax Act, individuals are entitled to tax deductions, which enables them to save on taxes while paying for the best possible education for their children.

Section 80C Tax Deduction for Tuition Fees

Tax deductions on tuition/education fees paid by a parent for the benefit of educating his or her children are allowed under Section 80C of the Income Tax Act. According to the tax brackets for 2020–21, taxpayers may deduct up to Rs 1.5 lakh under Section 80C, and other investments are also eligible for this credit. Even if they don’t have any other tax-saving strategies, parents can still save taxes by deducting the tuition they spent for their kids’ schooling. Parents are entitled to reimbursement for the real fees they paid during a given fiscal year.

Let’s take an example:

Mr Sharma, is a salaried individual with two children, ages 21 and 14, respectively. He pays a yearly tuition price of Rs 50,000 for his son’s engineering charge and Rs 15,000 for his daughter’s school fee, totalling Rs 65,000 per year for his children’s education. He can now claim this sum as a tuition fee deduction under Section 80C, saving him a significant amount of money in taxes.

Tuition Fees Are Tax Deductible Under Section 80C

Taxpayers who desire to claim a tax deduction for tuition/education fees must meet the following criteria.

• Individual Assessee: Only individual taxpayers are eligible for tuition fee deductions; Hindu Undivided Families and corporations are not.

• Limit: The maximum deduction allowed under Section 80C is Rs 1.5 lakh per fiscal year, with deductions only available for two children per assessee. If both parents are taxpayers, they can deduct expenses for up to four children. Individual taxpayers are not permitted to deduct the cost of educating more than two children.

• Child Education Only: Deductions are allowed only for tuition fees paid to educate a taxpayer’s children. Fees paid to educate anyone else, including himself/herself or a spouse, cannot be deducted.

• Courses: Tuition fee deductions are only available for full-time courses. This covers school expenses, graduation costs, and post-graduate course fees. Part-time course fees are not eligible for deductions.

• Affiliated: The school, college, or university where child studies should be affiliated.

Tax deductions are not eligible for payments

Your child’s education involves several financial costs, including tuition, books and supplies, uniforms, building fees, etc. Most educational institutions demand extra fees for supplementary services, which might cost thousands of dollars. Only the actual tuition fees paid in a given year may be deducted following Section 80C’s rules. Donations, private coaching, and other extra expenses are not deductible. Hostel expenses, library fees, transportation costs, etc. are also exempt. In a similar vein, tax deductions for distance learning courses are not permitted.

Tax Deduction on Tuition Fees Under Section 10

The Income Tax Act provides taxpayers with an extra instrument to reduce their tax liability. Individual taxpayers who earn a salary are eligible to save up to Rs 100 per month in taxes under this provision for each child. An individual taxpayer is qualified for tax breaks of Rs 200 per month under this amount, which can only be used for a maximum of two children. Only during the fiscal year in which the charge was paid may this amount be exempted. In addition to this exemption, a person may also request an exemption for the costs of their kids’ hostels. The maximum monthly hostel allowance for each child is Rs. 300.

What’s more?

One of Delhi’s most trusted Chartered Accountant Firms is Inside Tax.

You can connect with our Experts Tax Advisors for a better understanding of how to save your maximum tax and get multiple benefits from it, whether you are running a small business or a national-level company. Our expert team of CA’s will help you get your taxes sorted with maximum efficiency and minimum time. Contact us today for all kinds of tax-related services!