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Paying college fees? Check tax benefits

Relax With Tax | September 20, 2005

You have a question about house rent allowance, medical allowance or even a general tax query.

Here's where we step in with our experts, Relax With Tax.
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Are tuition fees exempted from tax under Section 80C? I thought only investments were included under that.

I am studying in an engineering college right now and my parents pay for my education. Can they get a tax break?

Can the education fees paid for a child be eligible for exemption under Section 10 (14) as well as 80C?

Currently, my dad's employer told him that only Rs 100 per month is considered towards tuition fees. This exemption is meant only for children studying in Std I to Std XII; it is not considered if your child is studing in college.

- Pradeep Shah

To help clarify the issue for you and your father, let me explain it in detail.

1. Does education expense fall under Section 80C?

The deduction under Section 80C is for specified investments and expenditure.

The investments

  • Provident Fund
  • Public Provident Fund
  • Life insurance premium
  • Pension plans
  • Equity Linked Saving Schemes of mutual funds
  • Infrastructure bonds
  • National Savings Certificate

The expenditure

  • Payments towards the principal amount of your home loan are eligible for an income deduction.
  • Payments towards the education fees for children are also eligible for an income deduction.
  • Despite what some think, the amount spent on medical treatment is not included.  

2. What is the limit under Section 80C?

The limit under this section is Rs 1,00,000.

This is irrespective of how much you are earn and under which tax bracket you fall.

Also, there are no sub-limits under this overall Rs 1,00,000 amount.

So, if you choose, you can invest the entire amount in ELSS or infrastructure bonds. The choice is entirely up to you as to how you want to reach this limit.

Or, if you are repaying a home loan and the principal repayment amounts to Rs 1,00,000, you can claim the entire amount as a deduction.

The deduction for tuition fees under Section 80C is available towards payment of education fees for children upto a ceiling of Rs 1,00,000.

However, in order to avail of this deduction, you will have to produce the fee receipt.

3. What about education allowance?

Exemption for education allowance is a fixed exemption amount of Rs 100 per child per month for a maximum of two children.

This exemption requires just a declaration from employees as to the number of children and their educational status.

4. Can you club the allowance and Section 80C?

In case a person has a child say studying, say, in an engineering college, he can be eligible for deduction of education allowance of Rs 100 per month as well as the deduction under Section 80C for the engineering college fees that he pays for his child's education. 

5. What about a loan?

Do note it is different if you take an education loan.

To avail of any benefits under Section 80E, an individual must borrow money from certain financial institutions, banks or approved charitable institutions for the purpose of pursuing a full-time education course.

The repayment of the principal amount of this loan and payment of interest should happen from the taxable income of the individual.

If the above conditions are met, the individual is eligible for deduction of the entire interest payout made during that year.

Got a question for Relax With Tax? Please write to us!

Note: Questions may be edited for brevity. Due to the tremendous response, all queries will not be answered.

Disclaimer: While efforts have been made to ensure the accuracy of the information provided in the content, or the author shall not be held responsible for any loss caused to any person whatsoever who accesses or uses or is supplied with the content (consisting of articles and information).

Illustration: Dominic Xavier

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Number of User Comments: 3

Sub: Educational fees can get me exemption in TAX?

Hi My name is prashant, I have completed my Graduation and currently i m persuing my matser's in Computer Science along with which i m ...

Posted by Prashant

Sub: Tax benefit on fees paid for self education

Can one claim tax benefit on the fees paid for self-education in a post graduate part time course?

Posted by Salil Warior

Sub: Educational fees can get me exemption in TAX?

Hi My self is surinder, I am persuing my Ph.D. in Electronics and communication(part time) along with i am doing job of lecturer in govt ...

Posted by surinder singh


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