Updated: As amended in finance act 2020
As per section 10(14) of Income-tax, children education allowance and Hostel Expenditure Allowance are eligible for deduction available to individuals employed in India.
| Children Education Allowance: Up to Rs. 100 per month per child up to a maximum of 2 children is exempt |
| Hostel Expenditure Allowance :Up to Rs. 300 per month per child up to a maximum of 2 children is exempt *Only if expenses are incurred in India as per Section 10(14) of the income tax act) |
The following facilities is taxable only in the hands of specified employees* [See note]
| Educational Facility extended to | Taxable Value of perquisite |
| Children | Provided in the school owned by the employer: Cost of such education in similar schools less Rs. 1,000 per month per child (irrespective of numbers of children) less amount recovered from the employee. Provided in any other school: Amount incurred less amount recovered from employee (an exemption of Rs. 1,000 per month per child is allowed) Provided in any other school: |
| Other family members | Provided in the school owned by the employer: Cost of such education in similar school less amount recovered from employee Provided in any other school: Cost of such education incurred |
For other educational facility:
| Particulars | Taxable value of perquisites |
| Reimbursement of school fees of children or family member of employees | Fully taxable |
| Free educational facilities/ training of employees | Fully exempt |
Note: Specified employee means an employee whose monetary income* under the salary exceeds Rs. 50,000 or a director-employee, or an employee who has a substantial interest (i.e. beneficial owner of equity shares carrying 20% or more voting power) in the employer-company. (*Monetary Income means Income chargeable under the salary but excluding perquisite value of all non-monetary perquisites).
Deductions under section 80C of IT act:
A salaried individual who opts for the old tax rule for assessment of tax for the FY 2020-21, income tax slabs remains to him/her the same as the previous financial year 2019-20 (AY 2020-21). Individual parent or guardian or sponsor can claim deductions on the amount paid as tuition fees to a university, college, school or any other educational institution under chapter VI-A section 80 C. The deduction is available only for full-time education courses that include a nursery school, crèches, and playschools. Each parent can claim a deduction of up to Rs.1.50 lakh separately every financial year. The aggregate amount of deduction under section 80C, 80CCC, and 80CCD shall not exceed INR 1, 50,000 for the individual parent. An Adopted Child’s school fees are also eligible for deduction. The deduction is available only for students studying in the institution, college, or university situated in India. The deduction can also be claimed for students studying in a foreign university-affiliated institution which is situated in India. The deduction is available to a maximum of 2 children for each individual. In other words, a maximum of 4 children’s tuition fee deduction can be claimed by two parents, i.e. 2 children by each parent.
Tax deduction on Interest paid on Education Loan:
An individual can claim income tax deduction on interest paid on education loan availed for self, spouse or his/her children u/s 80 E of I.T. Act. The guardian appointed by the court for a minor student is also eligible for income tax deduction on interest paid on education loan under the same section. One more benefit is that there is no upper limit for claiming deduction either on the amount of interest paid or rate of interest paid. The deduction can be claimed up to 8 years or closure of the loan whichever is earlier. If the interest is paid during the moratorium period, the time limit of 8 years begins from the date of the first repayment of interest on the loan. However, the tax benefit is restricted for education loan availed from the bank, notified financial or charitable institutions. The education loan availed from the employer, family and friends does not come u/s 80E. The deduction under section 80E is also allowed for education loan availed for studies abroad.
Source: Income Tax Department
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