Section 80C: Claiming tax benefit on tuition fees of kids

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Why are taxes so complex? Have you ever found yourself pondering over this thought? The reason is simple enough. Instead of trying to understand the concept, one likes to avoid it altogether. However, once you get a grip on the nitty-gritties of tax system, it can be a smooth process and might as well help you claim reasonable deductions.

Education is an expensive pursuit and one must ensure to avail the limited tax benefits attached with these – like how a parent can claim a deduction on the amount paid as tuition fees for their kid’s university, college, school or any other educational institution (must be situated in India even if affiliated to a foreign university).

This is because tuition fees qualifies for for tax benefit under Section 80C of the Income-tax Act, 1961. Taxpayers can claim deductions up to Rs 1.5 lakh/year as part of the school fees (or other investments). So even if you don’t have any other tax saving instrument, make sure to avail benefits against the actual fee paid for your child’s education in a financial year.

Who are eligible?

The deduction under Section 80C is available only to individual parent, guardian or sponsor for a  maximum of two  children per taxpayer. It can be claimed by an unmarried or divorced person too and is applicable for an adopted child as well. This deduction is available irrespective on the standard the kid studies in.

Individual parents can claim  a deduction of up to Rs 1.50 lakh every financial year for up to 2 children. If both parents are tax payers, they can cover the fees of 4 children.

For example, Mr X is a salaried employee with 2 kids (24 and 17 years old respectively). If he pays an annual tuition fees of Rs 70,000 for his son’s engineering and Rs 20,000 for daughter’s school fees, he can claim the total amount (Rs 90,000) as tuition fee deduction under Section 80C. This can help him save a significant portion of money in tax.

The deduction is available on actual payment and not on a payable basis. For example if the tuition fee is paid in April 2020 for the quarter ending March 2020 then the fee paid will be eligible for a deduction in the FY 2020-21.

Notably, this claim is limited to full time academic courses only. This includes fees for school, graduation and post0graduation courses.

Who are not eligible?

However, it does not include fees for  private coaching center and other expenses such as hostel expenses, mess charges, library charges or similar payments. Part-time, distance and crash courses also don’t come under this claim.

There are several other financial components to modern academia that ranges from from tuition fee, cost of books and materials to library fee, extra curriculars fee, uniforms and building fee. Most educational institutes charge extra for these additional services taking the total cost to lakhs often.

As per the Section 80C, only the actual tuition fee paid in a year can be claimed as deductions. No additional costs like donations, private coaching, hostel fees, library costs, transportation charges are eligible for deductions.

Tax deduction under Section 10

Under Section 10 of the Income Tax Act, the salaried taxpayer can save tax up to Rs 100 per month per child for a maximum of two children. This is considered valid only for the financial year in which the school fee was paid.

Additionally, you can also claim exemption up to Rs 300 per month as the hostel fees for a maximum of two kids per individual taxpayer.

The taxpayer must submit the receipt issued by the schools for the payment made during the financial year to their employer. This should be included in The Form 12BB (statement of claims by an employee for deduction of tax) before submitting proofs of investment at the end of each financial year.

If you’re not a salaried employee, claim the deduction under VI-A schedule by indicating the tuition fee amount under Section 80C on the income tax return.

Remember that your child’s education allowance is different and included as a part of the salary structure while the fees paid towards tuition fees is different. These are two separate deductions and can be claimed separately within the limit prescribed as per the provisions of the Indian Income Tax Act, 1961.