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Education, Tuition and School Fees Under Income Tax Act

With the increasing school and tuition fees, education has become an expensive necessity. An individual taxpayer must pay a huge amount of taxes even without adding educational taxes in it. The Government has tried to reduce this tax liability by providing tax deduction on several schemes under the Income Tax Act of 1961.

An individual can undertake several measures to curtail the amount of taxes paid to the Government every financial year. There are provisions under the Income Tax Act that can be used by assessees to get a deduction on the taxes. An assessee can be granted tax benefit on education if he/she shows the receipts of payments made towards the school.

Tax deduction as stipulated under Section 80C: On School and Tuition Fees

Section 80C of the Income Tax Act provides various benefits for individuals to claim a deduction on the taxes. Parents and guardians, who not wish to compromise on the education of their children can avail tax benefits under this section on the education bills. Taxpayers can earn a maximum rebate of Rupees 1.5 Lakhs on their taxes.

Even if the assessees cannot gain tax relief on any other taxes, they can claim the tuition fees they pay for their children’s or guardian’s education for a tax deduction, thus, ensuring that they can save money spent on the taxes paid within a fiscal year.

For example, Mr. Lokesh, a salary earning individual taxpayer with two children of age 20 and 16 respectively pays an annual tuition fee of Rupees 60,000 towards his son’s business school fee and Rupees 18,000 for his daughter’s school fee. He spends a total of Rupees 78,000 per year on his children’s education. In this scenario, Mr. Lokesh can claim the amount invested on his children’s education for deduction under Section 80C which saves an ample amount of tax.

Eligibility Criteria for Claiming Tax Deduction

All the assessees who are interested in incurring a tax deduction on school or tuition fees must meet the following criteria

  • The Education Institute should be Affiliated: The University, College or School that is attended by any child should have a necessary affiliation.
  • Tax Claim can be made only for full-time courses: Tax deduction on any payment made as tuition fees can only be claimed if the fees are paid for the full-time course. If the fees are paid in different parts or for part-time educational programs, this tax deduction cannot be availed.
  • Tax Deduction is only available for Children’s Education: Only those tax- paying individuals who pay the tuition fees for their children’s or ward’s education can avail the tax deduction on their payment.
  • Maximum deduction limit is Rupees 1.5 Lakhs.
  • Tax benefits available on education only for individual taxpayers: Only an individual taxpayer is eligible to avail tax deduction on the payment made towards education. This scheme is open to both individuals and Hindu United Families (HUF).

Key Elements of Exemption Policy under Tuition Fees

  • The maximum amount equivalent to Rupees 1.5 Lakhs can be claimed for deduction on the taxes payable under Section 80C of Income Tax Act, every financial year.
  • Deduction under this Section is only available for two children per assessee.
  • It may be possible to avail tax deduction on fee payments towards education for as many as four children if both the parents are tax-paying members.
  • Any fee that is paid for the education of more than two children (pertaining to one tax paying individual) cannot be claimed as a tax deduction.

Tax Benefits Provided under Section 10 on Educational Fees

Section 10 is an additional tool which can be used by an individual taxpayer to save more money on the tax payments at the end of every financial year. Under this section, provisions are available for a salaried tax-paying individual to save Rupees 100 every month on tax for tuition fees paid for one child. For an individual taxpayer, this amount is available for two children, as a result, an individual taxpayer can receive a deduction of Rupees 200 every month on the payment. The tax benefits can only be claimed on the fees paid during that specific financial year. Under Section 10, a deduction of Rupees 300 can be incurred on the amount paid towards hostel fees. This provision is only available for a maximum of two children, per taxpayer.

Payments not Eligible for the Tax Deduction on Education Fees

Apart from tuition fees, there are various other financial elements related to the education of a child. These financial expenditures include the cost of uniform, books, stationary, lab fees etc. Many educational institutions charge an extra amount of money from parents and guardians to provide a wide range of services to the students which can be a heavy burden upon the responsible bearer.

It is clarified under Section 80C that the provision of tax deduction available under this Section can be utilized by taxpayers to claim relief on the tuition fee only. Any other cost related services like private tuitions, a donation to an educational institution etc. are not eligible for tax benefit.

Some of the services provided by the institution that can qualify for tax deduction are transportation charges, library cost, and hostel fees. Correspondence courses and distant learning programs are also not entitled to education tax benefits.

How to Claim Tax Deduction on the Fees Paid to Educational Institutions

A taxpayer has to file for tax return or refund after the due tax amount gets paid in full.

Tax returns can be filed easily online. Any assessee filing for tax returns is given a time frame of one to two years after furnishing the taxes, to complete the paperwork and submit it. The other paperwork that needs to be included in the document at the time of filing for tax returns consists of receipts of children’s school fees, hostel fees or college fees, etc.

The taxpayer can make use of tax refund calculator, available online to determine the amount of deduction that is to be claimed. These calculators are available for free of cost.

In the News

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    Data Quest: The latest offering by tech enabling tax compliance firm, All India ITR, is its new e-filing app for Income Tax Returnees. Touted to be cost-effective, easy to use, secure, updated and with a round the clock helpline, this app promises to change the face of the tax compliance industry.

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