Tax Benefits on Children’s School Fees

There are several effective measures that can be undertaken by an individual to curb tax payments every financial year.Showing receipts for children’s school fees for instance can be a way to get exempted from tax payments as there are provisions for such exemptions under the Income Tax Act of 1961.

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Education is becoming increasingly expensive in India with school fees often costing as much as 7,500 INR annually. This means that the average amount of money spent on a child’s education for 10 years runs into as much as 1 lakh, Professional courses are known to charge even more money, and parents often spend more than 1 lakh a year in order to ensure a quality education for their children.

It is worthwhile therefore to avail the tax benefits that are made available specifically on tuition fees that are paid towards the education of a child. To know more about such provisions the following points need to be borne in mind.

Tax Deduction on School and Tuition Fees as stipulated under Section 80C

There are several provisions under section 80 c of the Indian Income Tax of 1961 for the deduction of tax on education or tuition fees that are paid by parents in order to educate their children. Tax payers may avail deductions of an amount as much as 1.5 lakh INR with several other investments also being eligible for such a rebate.

It is possible for parents to claim tuition fees that they end up paying for their children’s education as tax deduction making sure they are able to save tax even they do not have access to any other tax relief measure. In fact it is possible for parents to actually claim the exact amount of money that they paid as fee within a specific financial year.

Tax payers who are interested in claiming tax deductions on education or tuition fees needs to make sure that they meet the following criterion:

Educational Institution attended by the Child should be well affiliated

The university, college or school where the child has studied should be one that has necessary affiliations.

Tax claims can be made only for Full Time Course Fees

  • Tax deductions on the payment of any tuition fee can be claimed only for tuition fee that is paid for full time courses.
  • Examples in this respect include post graduation fees, school fees and fees paid for a graduate education.
  • If fees are also paid for certain part time educational programs then these may not be availed as tax deductions.

Tax Deductions permissible for Tuition Fees paid for Children’s Education Only

Tax deductions can be availed only on tuitions fees that are paid towards educating the child of the tax-paying individual. If the tax payer wants to educate himself further or wants to sponsor the education of his spouse then the money he spends on this may not be claimed as tax deductions.

Maximum Deduction Limit is 1.5 Lakh

  • The maximum deduction that is made permissible under Section 80 comes to around 1.5 lakh INR in every financial year.
  • Deductions can be availed for the education of only two children per one assessee.
  • However, if both parents of a child happen to be tax payers then it may be possible for them to claim tax deductions for as many as four children.
  • It is not possible for tax payers to claim any fee that is paid for educating more than two children in the family as deduction.

Tax Benefits on Education or Tuition Fees meant only for Individual Tax Payers

It is only individual tax payers who can avail tax benefits on the payment of tuition fee. Corporate and Hindu Undivided Families are not eligible for such deductions.

Tax Exemption Provisions under Section 10 on Tuition Fees

  • There is an additional tool that tax payers can make use of under Section 10 in order to be able to save more money on tax payments at the financial year end.
  • There is a provision under which salaried individual tax payers can be regarded as eligible to save around 100 INR every month as tax for tuition fees paid for one child.
  • Such an amount may be availed for as many as two children of an individual tax payer as a result of individual tax payers become eligible for tax deductions amounting to 200 INR in every month.
  • The exemptions can be claimed only during the particular financial year in which the fees are paid.
  • Section D also provides a hostel allowance at 300 INR every month per child and this is subject to 2 children in a family at the most.

What are the Payments that are not eligible for any Tax Deduction?

There are several financial components in the education of a child such as the cost of uniforms, books, pens and pencils and tuition fees. Many educational institutes these days are known to charge an extra amount of money for a wide range of additional services the cost of which can run into thousands and thousands of rupees.

The provisions under Section 80 c make it clear that it is only the money that is paid as tuition fee for a child’s education that can be claimed for tax deduction at the financial year end. Other related costs such as the cost of private tuition or donations made to educational institutions are never eligible for tax deductions.

Some of the other exemptions that can be made available are library costs, transportation charges and hostel fees. Tax deductions can also not be claimed on courses that are undertaken through correspondence or distance educational programmes.

How Can Tax Deductions be claimed on Children’s Tuition Fee?

 The process of claiming a tax deduction on the tuition fee that is paid for a child’s education every month or in every year is not a long drawn out one at all. All that a tax payer has to do is to file for a tax return or refund once the remaining tax dues if any have been paid.

Tax returns can be filed online in a smooth and efficient manner. Those filing tax returns are given a window of as many as one or two years after the tax payment due date to get their paperwork done and submitted.

In order to determine the amount of deduction that is to be claimed, tax payers can make use of a tax refund calculator that is available online. Such calculators are easy to use and may also be accessed for free.

While the paperwork associated with filing tax returns requires care and attention it is not likely to make things complicated. A number of receipts have to be provided at the time of claiming tax returns including the receipts of children’s school fees or college fees, hostel fees etc.

What are the Pros and Cons of Filing Tax Returns Online?

 Pros 

 Cons

Paperwork gets submitted in a timely fashion

Returns can be filed from the comfort of the home or office 

Quicker implementation of tax refund 

Access to high speed internet needed when filing returns as IT website tends to slow down quite a bit 

Greater chances of making errors when filing returns online

What are Some of the Other Well Known Ways of Claiming Tax Benefits?

Investing in Mutual Funds

  • There are quite a few ways by which tax deductions can be claimed by hard working tax payers looking to save a bit of money at the end of every financial quarter or year.
  • One such way is to be investing in mutual funds.
  • Mutual funds are open ended equities that make it possible for tax payers to claim tax deductions while incurring a huge amount of profit at the same time.
  • Profit is ensured through the long term appreciation of capital as well as by growth in equity.
  • Mutual funds are easy to invest in as the minimum amount of money that can be invested to be a beneficiary of such schemes is about 5000 INR.
  • The process of paying for such an investment can be made even easier by opting for what is known as a Systematic Investment Plan.
  • By choosing SIP investors can get to pay an amount as minimal as 500 INR towards their mutual funds investment and also claim deductions at the end of the year.

Buying Life Insurance or Medical Insurance Policies

 Another excellent way of claiming tax benefits is to purchase life insurance policies or medical insurance policies. Tax deductions can be claimed on premiums that are paid for life insurance policies under section 80 D of the Income Tax Act while deductions may be claimed on premiums paid towards medical insurance policies under section 80 c.

The policies that are purchased for this purpose are those that should be in operation for a good 10 to 12 years at least.

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