Children's education tax planning: The 80C lifeline
Upstox
3 min read • Updated: February 19, 2024, 11:01 AM
Summary
Provisions under Section 80C help Indian parents leverage tax deductions and ease the financial pressures of paying for their children's education. Section 80C allows both parents to benefit from the tax break and encourages literacy. As per NSO (National Statistical Office), which falls under the Ministry of Statics and Programme Implementation (MOSPI), the literacy rate in India as of 2023 stood at 77.7%. This is a 5% increase from figures recorded in the 2011 census. While statistics like this paint a bright picture, for households having to pay, tuition and associated costs can be a major financial strain. Fortunately, the government gives a tax break on tuition payments in an effort to reduce financial strain and encourage literacy. If you are a parent of children in the academic years of their life, take a closer look at the tax benefits for children's tuition fees, as well as the requirements for eligibility for them.
Section 80C deduction for tuition fees
Any parent who has paid tuition to a school, college, or other institution of higher learning may deduct that amount paid from their taxes. Section 80C does not allow for the deduction of other expenses, such as transportation fees. Individuals are permitted to claim tuition costs of up to ₹1.5 lakh in a financial year, in addition to rebates for provident fund insurance, pension, and others.
Subject to certain requirements, parents who spend any amount towards their children's education may be eligible for a tax deduction under Section 80C -
Eligibility
Only a parent may claim this deduction. The cost of an adopted child's education may also be deducted.
How many children?
A tax deduction of up to ₹1.5 lakh may be made by each parent for a maximum of two children individually. If both parents file taxes, they are eligible to claim deductions for a total of four children.
Upper limit
Under Section 80C, parents can save up to a sum of ₹1.5 lakh per fiscal year. It’s important to be aware that a taxpayer's total deduction under Sections 80C, 80CCC, and 80CCD is limited to ₹1.5 lakh.
Defining tuition fee
Only funds used to support the child's full-time education can be defined as tuition fees. Expenses like mess charges, library membership fees, personal or private coaching, donations to the institution and comparable overheads will not be considered tuition.
How can parents claim deductions?
Section 10(14) exempts individual taxpayers from income tax for their children's education, while Section 80C allows them to deduct their tuition costs.
When submitting financial evidence at the end of the year, salaried persons are required to give their employer the fee receipt that they were given by the schools or institutions. The same needs to be declared on Form 12BB as well.
Only tuition fee deductions under schedule VI-A of Section 80C are available to non-salaried individuals. When submitting an ITR, non-salaried individuals are not needed to provide any bills. They should still save the receipts as proof of their claims.
As per the schedule VI-A, taxpayers are allowed to deduct specific investments, costs, and contributions made throughout the fiscal year from their gross total income. Because they lower the amount of tax owed, the deductions under chapter VI-A provide taxpayers with a sizable potential to save money on taxes.
Conclusion
Section 80C allows both parents an avenue to avail deductions on their children's education. This provision is an encouragement for parents and effectively reduces the cash burden associated with educating children.
However, bear in mind that the cost of part-time courses cannot be written off as tax-deductible. Additionally, when paying tuition for one's partner, oneself, a sibling, a parent, or any other relative besides children, there is no tax benefit available. Furthermore, the same can be said for any tuition paid to a foreign institute.