Income Tax Deduction on the Tuition Fee Applicable only if the Institute is Situated in India

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Many taxpayers do not have clear notion on how to apply income tax deductions on education expenses. Education expenses can come under separate categories. Different sections of the income tax apply for income tax deduction pertaining to separate types of education expenses. The tuition fee is included in the regular periodic school fees. The fee is payable monthly, quarterly or even yearly.

Which Sections Address Income Tax Deduction Benefit for Tuition Fees?

Income tax deductions on tuition fees expenses of school and college going children in India can be claimed by individual employed in India under section 10 (14) of the income tax act. Section 10 (14) provides tax benefit up to Rs 1200 per year per child up to two children for expenses on education including tuition fees. An individual taxpayer can claim tuition fee expense tax benefit for maximum two children under section 10. If an individual has a taxpaying spouse, then the spouse can claim for up to two more children.

Section 80 c has provisions for tax deduction benefits including tax benefits for tuition fees expenses. The maximum limit of income tax deduction allowed under section 80 c is Rs. 1.5 lakh. If the taxpayer has high tuition fees requirement or a top priority for the same as compared to other schemes eligible for income tax deductions under 80c, then s/he can claim entire 1.5 lakh income tax deduction for tuition fees alone. However, if the taxpayer has other priorities also like life insurance/investment/PF, then the entire income tax deduction limit up to 1.5 lakh needs to be distributed according to taxpayer’s priority.

What is the Eligibility for Income Tax Deduction for Tuition Fees?

Only an individual taxpayer can apply for income tax deductions for tuition fees for his /her school or college going children, provided the school is located in India. HUF is not eligible to apply for income tax deduction on tuition fees. The income tax deduction for tuition fees is applicable for up to two children. If a taxpayer has a third child, then income tax deduction for tuition fees of that child can be claimed by the taxpaying spouse of the individual taxpayer. Each individual can claim income tax deductions for up to two children for the paid tuition fees. If husband and wife are both individual tax payers then in such family, the income tax benefit for total four school going children can be claimed, provided all the children go to schools located in India.

It is not necessary that only biological parents can claim tax benefit on tuition fees. Income tax deduction on tuition fees can be claimed by any individual taxpayer who is a legal guardian of school going children, due to adoption or due to the absence of parents. The income tax benefit for tuition fees can also be claimed by single parents and unmarried guardians of school going children if they are sending their children to authorised schools located in India.

Under section 80 c income tax deduction benefit on tuition fees can be claimed only when the school is located in India and is a recognized school by the Indian Government. The school can be a government, public or private school. Here it is important to note that accredited schools in India affiliated to foreign universities/institutes or boards are also eligible to be considered for tax benefit on school tuition fees. Authorized junior schools, toddler schools, play schools, crèches that educate children and are located in India are also eligible to be considered for income tax deductions for tuition fees expenses of children. However Indian schools located abroad are not eligible for income tax deduction for tuition fees under section 80 C of the income tax act.

Income tax deduction benefit on school/college tuition fees can be only claimed for full-time courses. Part-time courses are not included under eligibility for income tax deductions on tuition fees under section 80c.

The income tax benefit for tuition fees can be claimed by the parent(s) or guardian(s) for school or college going dependent children who can be minor as well as above eighteen years of age.

Which Educational Expenses are not Eligible Under Tax Benefits for Tuition Fees Expenses?

Here it should be noted that section 80 c clearly out that income tax deductions on tuition fees payment can only be claimed for tuition fees expenses and no other payments made to school or college. Generally, most authorised schools located in India issue bill and receipt of school fees payment. The school fees payment receipt mentions the categories under which fees have been charged.

The tuition fee is the amount charged by the institution for teaching the students. While claiming income tax deduction for school fees expenses, the individual taxpayer needs to deduct amount mentioned only under the head of tuition fees. The following costs are not included under tuition fees

  • One time school admission charges
  • Annual charges
  • Transportation costs
  • Charges for extra classes
  • Fee for curricular activities
  • Charges for smart classes
  • Costs applicable towards sports and activities classes
  • Expenses for taking coaching or private tuition
  • Hostel fee
  • Mess charges
  • Boarding fees
  • Library costs
  • Stationary expenses
  • Excursion fees
  • School/college donation
  • School college development work charges
  • Late school payment
  • Readmission fees

(The above list is not exclusive)

The above-mentioned exclusions apply to exclusions of not being tuition fees. There are several other exclusions which in spite of being tuition fees expenses cannot be claimed for income tax deductions under section 80 c. These mainly include the following exclusions

  • Tuition fees for the part-time course
  • Tuition fees paid in foreign institute/college/university
  • Tuition fees not paid for children but self, spouse, brother, sister, relative
  • Tuition fees for Indian schools in foreign countries

When Can an Income Tax Deduction on Tuition Fees be Claimed?

Income tax deductions on tuition fees can be claimed only in the following tax year after tuition fees have been paid. For example for tuition fees paid in the year 2018-19, income tax deduction claim can be raised in tax filing year 2019-20. Income tax deduction benefit on tuition fees is thus only applicable on the paid amount and not on the amount required to be paid.

How to Claim Income Tax Deduction on Tuition Fees Expenses?

To claim tuition fee expenses for income tax deduction benefit, it is essential to get the receipt of school fees payment for the entire financial year. Most schools operate from one fiscal year to another and individuals can ask the school to generate school fees payment receipt for the entire financial year. It is important that the fees be segregated under relevant heads of charges and tuition fees amount paid during the whole fiscal year should be mentioned under the clear header.

Processes defined for claiming income tax deductions on tuition fees expenses under sections 80c and 10 (14) fall under two categories:

Claiming of Tuition Fee Under Income Tax Benefit by Salaried Individuals

Salaried individuals would need to submit the school fees receipt for the entire year as well as filled in form 12 BB to their employer. Form 12 BB is an investment declaration form by a salaried individual that mentions all the tax deduction and exemption claims made by the employee and includes income tax deduction benefit on tuition fees expenses. The documents need to be completed and submitted before the end of the financial year.

Claiming of Tuition Fee Income Tax Benefit by Non-Salaried Individuals

Nonsalaried individuals can also claim income tax deduction benefit for tuition fees expenses of children. While filing the income tax return form, a nonsalaried individual would need to claim the deduction under section VI. In section VI, the nonsalaried taxpayer would need to show the amount paid as tuition fee for the whole financial year and support his filing with relevant fees receipt document.

Income Tax Treatment of Education Expenses other Than Tuition Fees

Certain education expenses other than tuition fees can also fetch income tax deduction benefits to individuals, these include the following:

Hostel Expenses Allowance

individuals employed in India can claim income tax deduction benefit for hostel expenses allowance up to Rs 3600 per year, per child up to two children. This income tax deduction benefit is available under section 10 (14) of the income tax act, apart from the tuition fee income tax deductions benefit of Rs 1200 per child per year up to two children.

Education Loan Repayment Income Tax Deduction Benefit

Individuals can claim deductions on education loan repayment amount under section 80 E of the income tax act. The education loan can be taken for pursuing higher studies in India or abroad.

Examples of Income Tax Deduction Benefit Claim for Tuition Fees Expenses

Q.1 A contributes Rs 4000 p.m to EPF account and Rs 6000 annually for life insurance premium. How much income tax deductions can A claim for tuition fees expenses of his two children under section 80 c of the income tax act?

Ans. EPF and life insurance contributions, as well as tuition fees, expenses all qualify for income tax deductions benefit under section 80 c. The maximum limit of deduction that can be claimed under 80 c is Rs 1.5 lakh per financial year. For EPF A will be claiming Rs 48, 000 (4000 by12) and for life insurance A will be claiming Rs 6000 per year. So A will be claiming Rs 54, 000 per year income tax deduction benefit under section 80 c due to EPF and life insurance contribution.

After claiming Rs 54, 000 income tax deductions benefit A will still be left with Rs 96,000 tax deduction benefit under 80 c. He can use this to claim income tax deduction benefit for tuition fees expenses paid for his two children. Suppose if tuition fee is Rs 3000 per month per child, then A can claim Rs 72,000 tax deduction benefit for tuition fees expenses. Thereafter A will still be left with Rs 24,000 deduction benefit.

If A’s income is still in the taxable slab, he can lower his taxes by claiming the remaining deduction of Rs 24,000. He can do this by investing in girl child education scheme, ELSS scheme, pension fund scheme and other schemes that qualify for income tax deductions benefit under section 80C.

Q.2 A and his wife B are both employed, individual taxpayers. How much income tax deductions can A and B both claim for tuition fee expenses?

Ans. Both A and B can claim income tax deduction benefit for tuition fee expenses up to Rs 1.5 lakh each per year, up to two children each, under section 80 c of the income tax act. That means, the family can claim overall Rs 3 lakh tax deduction benefit for up to four children, for tuition fee expenses. However, the entire tax deduction limit of Rs 3 lakh per year of the family may not be used for tuition fee expenses. The family may choose to take up investment schemes, EPF, life insurance, and other schemes besides tuition fees expenses and distribute the deduction limit among these.

Q.3 P is an employed individual with two children and a dependent wife. He is already claiming income tax deduction benefit for EPF, life insurance, and tuition fee expenses of his two children but has not exhausted the deduction limit of Rs 1.5 lakh available under 80 C. P’s wife wants to get enrolled for BEd course. Can P claim a further tax deduction on wife’s tuition fees expenses?

Ans. As per section 80 C, income tax deduction benefit for tuition fees expenses can be claimed for biological and adopted children. The benefit is not extendable to tuition fees expenses of spouse, parents, self, brother, sister or relative.

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