Children Education Allowance Deduction & Exemptions

Children Education Allowance

Anjana Dhand •

Updated on 24 Oct, 2023

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Children Education Allowance
Other Child Education Deductions

Education has the ability to enhance people’s quality of life at a geometrically faster rate. Every parent is concerned about children education. You are inspired to work harder each day because you want to provide your child with a high-quality education. Simply putting money in a savings account might not be enough to cover the cost of your inevitable educational expenses because going to school and pursuing further education are growing more and more expensive with each passing year.

Further, one needs to chip into their funds in order to spend more on children’s education. In this case, you require a wise investment strategy and tax planning. This might make it possible for you to help your kids achieve their academic goals while also reducing your tax burden. The Income Tax Act provides children education allowance to help you accomplish both objectives.

Children Education Allowance

The Income Tax Department provides its taxpayer’s income tax deduction against the expenses made towards educating their children. The intent is to further contribute to the advancement of literacy, particularly in the backward states.

A resident individual who is under employment can claim a children education allowance.
The limit allowance is Rs 100 per month per child. A taxpayer claim allowance for up to 2 children only.
The taxpayer must incur expenses to claim the benefit of the allowance.

Other Child Education Deductions

Children Hostel Allowance

Income Tax – Section 10(14) of Income Tax Act 1961
Eligibility– Resident Individual
Limit of Deduction– Rs 100 per month per child, up to a maximum of 2 children.

Condition

The individual taxpayer must be employed in India. Furthermore, child education expenses must be incurred in India to claim this child education allowance as per the Indian Income Tax Act.

Tuition Fee

Income Tax – Section 80C of Income Tax Act 1961
Eligibility – An individual parent or guardian or sponsor
Limit – Each parent can claim a maximum of Rs. 1.5 lakh separately for each financial year for a maximum of 2 children. Therefore, a deduction for a maximum of four children can be claimed, i.e. 2 by each parent. Adopted Child’s school fees are also eligible.

Conditions

This child education allowance or deduction is available only for full-time education courses that include nursery schools, creches, and play schools.
The deduction is available only on actual payment and not on a payable basis. For instance, if the fee is paid by the parent in April 2023 for the quarter ending March 2023, then the fee paid will be eligible for a deduction in FY 2023-24.
The fee can also be claimed by an Unmarried person/ divorced parent.

Interest on Education Allowance

Income Tax – Section 80E of Income Tax Act 1961
Eligibility – Individual/Legal guardian. HUF and any other taxpayer not eligible.
Limit – The total interest amount of the EMI paid during the financial year for a period of 8 consecutive years starting from the year in which the assessee starts paying interest.

Conditions

Individuals must have taken loans for the higher education of spouses or children or for a student for whom the individual is a legal guardian.
Parents can easily claim this deduction for the loan taken for the higher studies of their children.
Loans must be obtained from a bank/financial institution, or an approved non-profit organization.
Moreover, loans taken from friends or relatives are not eligible for this deduction.
Loans were to be taken to pursue higher studies. It does not matter whether such education loans for higher education are made in India or outside of India.
This child education allowance or deduction is only available for eight years from the year you start repaying the loan or until the interest is paid in full, whichever comes first.

Plan your child Education with these children funds