Are Child Education Expenses Tax Deductible?

Most taxpayers do not have much of a clue about the expenses on which they can claim tax deductions and thus reduce their tax liability. It is impossible to keep track of all the expenses which are deductible from gross income, but deductions available on common and frequently incurred expenses must be borne in mind. One such expense is costs incurred on children’s education. Let us understand how the Income Tax Act treats this expense.

Section 10(14)(ii) of the Income Tax Act, 1961 provides for certain special allowances that can be claimed as exemptions from income earned from ‘Salaries.’ These allowances are in the nature of personal expenses incurred by the assessee. However, these exemptions are each subject to certain limits.One such expense covered under this clause is children education allowance. This expense represents the amount spent on tuition fees for children’s education. The maximum allowable exemption for children education allowance is Rs. 100 per month per child, upto a maximum of two children. Thus, this exemption can be availed almost twice, that is, for expenses incurred on behalf of a maximum of two children. This works out to be an annual allowance of Rs. 1200 per child.If the assessee has a taxpaying spouse, then that spouse cannot claim this deduction for the expenses incurred on behalf of the children that the assessee has already claimed an exemption for. However, the taxpaying spouse can claim a deduction for two more children. Thus, a deduction for a maximum of four children can be claimed by a taxpaying family.

Payment of tuition fees made by an individual assessee to any educational institute within India is eligible for deduction under section 80C of the Income Tax Act. This deduction can be claimed at the time of admission or anytime thereafter for the purpose of full-time education of any two children of the individual. This benefit is only for the amount of tuition fees for full-time education and shall not include any payment towards development fees or donation. A maximum total of Rs. 1.5 lakh can be deducted from gross taxable income in this case.

Section 10(14)(ii) of the Income Tax Act, 1961 also covers children’s hostel allowance. This expense represents the amount spent on hostel fees incurred on behalf of the assesse’s children. The maximum allowable exemption for children hostel allowance is Rs. 300 per month per child, upto a maximum of two children. Therefore, even this exemption can be availed twice, that is, for expenses incurred on behalf of maximum two children. This works out to be an annual allowance of Rs. 3600 per annum per child.An essential point to note here is that this deduction can only be claimed on the income of a person registered as an individual. Therefore, a Hindu Undivided Family (HUF) is not eligible for such exemption.Ready to make the most of your money? Start your tax planning journey now!

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.