Today as we move about in this rapidly changing world, we perceive that education is the most important act for social, economic, and political transformation. A well-educated population, equipped with the relevant knowledge, attitudes, and skills are essential for economic and social development in this 21st century.
The Government of India [“GOI”] has been trying to enhance the quality of education since the time of independence. It has introduced various programs, campaigns, aid to free of cost education, mid-day meal, granted scholarships, various other incentives to eradicate the illiteracy rate from the society.
Moreover, to promote a higher literacy rate for the education of children and youth in India, it has also granted various tax benefits to the individuals in lieu of the same. In this regard, the GOI has extended benefits by way of providing allowances and tax exemption benefits on incurring expenditure for the purpose of education.
The various exemptions and allowances under the Income-tax Act, 1961 [“the Act”] w.r.t promoting the education is given in the pictorial diagram below :
In accordance with the above, we understand that expenditure incurred for the above purpose can be claimed as an allowance or exemption from the taxable income of the person. Hence, it is now imperative to understand who can avail such deductions/ exemption, what are the eligibility criteria for claiming the benefits, if there are any limitations or restrictions also, etc. Let’s understand this in detail in the table below:
| Particulars | Children Education | Hostel expenditure | Payment of tuition fee | Receipt of scholarship |
| Who is eligible | Individual parent | Individual parent | Individual parent or guardian or sponsor | An individual who is in receipt of the scholarship |
| Expenditure incurred | Child’s education expenditure | Child’s hostel expenditure | Child’s tuition fee | For meeting cost of education for its own |
| Maximum exemption limit Amount (in INR) | INR 200 per month per child | INR 300 per month per child | INR 1,50,000 | No limit prescribed |
| Remarks | Maximum of 2 children in a nuclear family | Maximum of 2 children in a nuclear family | Maximum of 2 children for each individual parent | |
| Provision of the Act | Section 10(14) of the Act | Section 10(14) of the Act | Section 80C of the Act | Section 10(16) of the Act |
| Allowance/ deduction/ exemption | Allowance is given while computing the total income | Allowance is given while computing the total income | Deduction from the total income | Exempt from taxation |
Notwithstanding the above, while claiming a deduction under section 80C of the Act, one must take a note of the below points:
- A deduction is not available towards payment made for school fees of self, spouse, brother or sister, father or mother, or any other relative.
- Tuition fees will not include development fees, donation or charity, Private Coaching center, other expenses such as hostel expenses, mess charges, library charges, or similar payments and transport fees.
- Fees paid to a foreign university situated outside India are not eligible for this deduction.
- A deduction is available only for full-time education courses that include a nursery school, creches, and playschools.
- A deduction can also be claimed by a divorced parent or unmarried person i.e., an adopted Child’s school fees are also eligible for deduction.
- The maximum deduction on payments made towards tuition fees can be claimed for up to Rs 1.5 lakh together with the deduction with respect to insurance, provident fund, pension, etc. in a financial year.
Deduction under section 80E of the Act on repayment of interest on education loan:
Separately, where an individual has taken a loan from any financial institution or any approved charitable institution for the purpose of pursuing his higher education or for the purpose of higher education of his relative, then the deduction can be claimed under section 80E of the Act for the repayment of interest on education loan. In this regard, the following points are to be taken under consideration for the purpose of claiming deduction under the aforesaid section:
A deduction shall be allowed for –
a) 8 Assessment Year(s); or
b) Assessment Year in which the interest paid in full; whichever is earlier.
- A deduction is allowed only if an education loan is taken for a spouse, children of that individual, or the student for whom the individual is the legal guardian.
Disclaimer:
The above article is based on the literal interpretation of the Act and does not address any specific issues emanating from the aforesaid sections of the Act.
Written by: CA Bhumika Singh
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