Thankfully, investing in children’s education does have short term benefits on the tax front. Section 80C of the Income Tax Act allows deductions to taxpayers under various education-related heads. Below are a few ways in which you can minimize your tax liability when it comes to children’s education.

Invest in ULIP

Child education Unit-Linked Insurance Plans are eligible for a maximum deduction of Rs 1.5 lakhs under Section 80C. They offer a two-fold benefit: insurance and equity returns.
This can be an ideal long-term investment avenue for meeting education goals that are 10-15 years into the future. Being market-linked, they have an inherent potential for better returns in the long term.
At the end of its term, the policy pays a lump sum maturity value. You can stagger multiple ULIP investments that pay at regular intervals so that your children’s education needs can be met comfortably.

Interest on education loan

Education loans can be indispensable for pursuing higher education courses. Whether your child plans to study in India or abroad, you are eligible for tax deduction. However, this is contingent on the loan being issued by a recognised financial institution. Under Section 80E, interest payable on education loan EMIs can be claimed.

If you are already in the high-income tax slab, this exemption could lower your tax liability substantially as no upper limit for deduction has been prescribed.

Exemption on tuition fees

This deductible is different from that for children’s education allowance. Tuition fees paid during an entire academic year can be claimed, if you are a salaried employee. However, this benefit only applies to educational courses pursued within the country. It is also not applicable for short term courses.

Invest in ELSS

Equity-linked savings scheme(ELSS) can be a vehicle for creating an education corpus for your children. You can opt for a systematic investment plan (SIP) in an equity-linked mutual fund that invests in large-cap or mid-cap stocks for long term education goals.

Investments made in ELSS qualify for tax deduction under section 80C of the Income Tax Act, 1961. Ask your employer for Form 12BB which needs to be filled for claiming exemption under this category. Reduce your tax liability and secure a world-class education for your child by adopting a balanced investment strategy.

 
DISCLAIMER

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.



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