“Upon education of the people of the country, fate of the country depends”, said former Prime Minister of United Kingdom Benjamin Disraeli. On this believe, the government doles out a number of tax reliefs to tax payers for education expense. Let us discuss some of them.
Payment of tuition fee
You can claim a deduction upto Rs 1.5 lakhs every year with respect to tuition fees paid for full time education of maximum of two children in a school, college, university or any other educational institution in India. It can be claimed along with other eligible items like provident fund and PPF contribution, home loan repayment and life insurance premium. The deduction up to Rs 1.5 lakh covers only tuition fees and not any donation or development fee. In case a person has more than two children undergoing full time education and if both the parents are working then each of the parent can claim this deduction for two children.
Benefit for interest paid on education loan
Section 80 E allows you deduction with respect to any amount of interest paid on education loan taken for higher education of certain persons. Higher education here means any educational course undertaken after completion of Senior Secondary Examination. You can claim this benefit for yourself, your children, your spouse and any child for whom you are a legal guardian. The loan has to be one which is taken from either a financial institution or an approved charitable institution.
This deduction is available for eight years in a row from the year in which interest payment starts. This deduction is available on payment basis irrespective of the number of years for which it is paid during the year. The course for which the education loan is taken can be part time or full time anywhere in the world unlike for claiming tuition fee where it has to be full time course in India. So if you borrow from your friends or relatives for your education, you cannot claim this deduction.
Exempt allowance for the salaried
The tax laws also provide for certain allowances received from the employer as fully exempt. The first exempt allowance is education allowance received from your employer upto Rs 100 per month for each child restricted to two children. The second exempt allowance is hostel allowance @ Rs 300 for each child restricted to two children. The allowance is treated as exempt only if you have incurred the expenses against the allowance granted by your employer. You cannot claim these exemptions unless your employer provides you such allowance as part of your salary.
The Indian government is keen to improve the education levels in India and grants tax benefits related with education.
The author is CA, CS, CFPCM