The Income Tax Department has introduced various tax benefit schemes to promote the education and literacy benefits for citizens. Schemes reduce taxable income and tax payable. The Indian government has allowed tax exemption on the tuition fee paid. In some industries, the deduction of education fees is incorporated in the salary structure.
The government pays educational expenses of the government employees from the Children Education Allowance. The Central Pay Commission, established to provide rules for salaries and other payments to government employees, decides such benefits.
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What is Children’s Education Allowance?
Employees receive Children Education Allowance to bear the educational expenses of their child. The education allowance for the children covers the costs related to the school and hostel. The Children Education Allowance was introduced on 1st September 2008.
Education allowance as per Section 10(14) of the Income Tax Act, 1961
TheSection 10(14) of Income Tax Act, 1961 provides special allowance to salaried individuals to cover educational and hostel expenses.
Types of fee reimbursable under Section 10(14)
Types of fees that are eligible for reimbursement:
- Tuition fee
- Admission fee
- Practical fee
- Special fee charged for electronics like music or any other subject
- Fee paid to use any appliance or for any aid
- Library fee
- Any other fee charges
The charges mentioned are levied by the school directly to the student.
Other than these reimbursements, the following other allowances can be claimed:
- Set of textbook and notebook for the current year
- Two sets of school uniforms
- A pair of shoes
Eligibility requirement for school or institution
To benefit from Children Education Allowance, a child should be studying in an institution or school recognised by the Central Government, State Government, or any other Union Territory Government. Educational authorities can recognise the educational institute with jurisdiction over the institute.
The condition is also applied to children studying in the lower and upper kindergarten.
Eligibility requirement for children
A minimum age is not prescribed to claim the benefit of children’s education allowance for the nursery children. Such age is not prescribed for physically or specially challenged children.
The maximum age for a normal child to claim the benefit of child education allowance is 20 years, and the maximum age for a specially abled child is 22 years.
Educational allowances for the central government employees
Children Education Allowance is paid to the employees of the central government. This allowance also includes the employees of the central government from Nepal and Bhutan and employees whose children are studying abroad. However, for receiving Children Education Allowance, a certificate should be obtained from the Indian Mission in a specific country that recognises the educational institute.
Tax deduction on tuition fees under Section 80C
A tax deduction other than the Children’s Education Fee can be claimed on the tuition fee paid by the parents. The deduction can be claimed for any of the fees paid at the time of admission or at any other time to the registered school or college, or university. Under the Income Tax Act‘s Section 80C, a tax deduction can be claimed for full-time education. This tax deduction can be claimed by both salaried and self-employed individuals.
Eligibility for tuition fee tax deduction
Tax deduction can be claimed only by the individual satisfying the condition for eligibility. The condition for eligibility for tax deduction are as follows:
- Individual assesses only: Tax deduction can only be claimed by individual assesses and not by Hindu Undivided Families or Corporates.
- Limit: The maximum limit permissible under Section 80C of the Income Tax Act, 1961 is Rs. 1.5 lakhs. An assessee can claim the tax deduction only for two children. When both parents are taxpayers, tax deduction can be for four children.
- Child education only: The tax benefit can only be claimed towards educating the child. The fees for educating anyone else cannot be included in tax deductions.
- Full-Time courses only: Tax deduction can be claimed only on the tuition fees paid for the full-time course. The courses can be at school or for graduation or post-graduation.
- Affiliated institution: The child should be studying in the school, college, or university affiliated with the necessary educational body.
Educational expenses that cannot be claimed under tax deduction
- A tax deduction cannot be available for any other fees other than tuition fees.
- A tax deduction cannot be claimed for any fees paid to avail of the part-time course.
- A tax deduction cannot be claimed for school fees paid for the spouse or another person other than the child.
- A tax deduction cannot be claimed if the fees are paid to any foreign institutes, even for the child’s education.
How to claim tax benefit on tuition fees paid for children
To claim the tax benefit on the tuition fees, the following steps should be followed:
- Submit the receipt issued by the institution for the payment made.
- Show the tuition fee paid in the form 12BB before submitting the proof at the end of the financial year.
- Any individual who is not salaried can claim a deduction under Schedule VI-A by showing the fees paid under Section 80C while filling the income tax return.
Children Education Allowance was introduced to promote children’s education and improve literacy rate. The allowance has reduced the expenses of the child’s parents, which has encouraged them in educating their child without any burden. The literacy rate of India improved after implementing the tax deduction policy, which has played an essential role in saving money for a child’s education.
The conditions for Children’s Education Allowance are provided in the Income Tax Act, 1961. If an employee is from a government recognised company, then a Children Education Allowance is claimed under the Income Tax Act, 1961, Section 10(14) and a tuition fee tax deduction under Income Tax Act, 1961, Section 80C. Children’s education allowance can only be received for a child and cannot be claimed for a spouse or other person other than a child.
Can the Children Educational Benefit be claimed for the adopted child?
Yes, the children's educational benefit can get claimed for the education of the adopted child.
Can Children Education Allowance be claimed for a child twice for the same class?
Children Education Allowance does not depend upon the child's performance in a class. Even if a child fails in a class, he is eligible to avail the benefit of the Children Education Allowance.
What is the upper age of the child for claiming the Children Education Allowance?
Children Education Allowance can be claimed until the child turns 20 years. In case of disability, the Children Education Allowance can be claimed up to 22 years.
Is there any minimum age prescribed for the child claiming the Child Education Allowance for the child studying in nursery class?
No minimum age limit has been prescribed for claiming Children Education Allowance for the child admitted in nursery class. However, for physically challenged children, the minimum age is 5 years.