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