Mukesh Patel.in
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international tax expert / columnist / author / speaker

TAX BREAK FOR YOUR CHILDREN’S EDUCATION

If you are spending a lakh on children’s tuition fees

You can reap a cool tax saving of upto Rs.30,900!

Today’s Q & A presentation discusses some interesting issues in relation to the tax incentive offered for your children’s education by Section 80C of the I.T. Act.

Deduction under Section 80C

Query: What expenditure for children’s education is eligible for deduction under Section 80C?

Reply: Any payment as ‘tuition fees’ whether at the time of admission or thereafter, to any university, college, school or other educational institution situated within India, is eligible for deduction under Section 80C.

Query: Are there any restrictions or monetary ceilings applicable in regard to claiming this deduction?

Reply: Section 80C clearly states that any payment towards any development fees or donation or payment of similar nature shall not be eligible for such deduction. Moreover, the payment of tuition fees should have been incurred for the purpose of full time education and only for any two children of an individual.

The earlier monetary ceiling of Rs.12,000 per child prescribed for purposes of tax rebate upto FY 2004-05 came to be done away with under Section 80C. Accordingly, any such expenditure, within the overall limit of deduction of Rs.1,00,000 under Section 80C, is eligible to be claimed and you can save Income-tax upto Rs.30,900, if you are in the maximum tax bracket of 30.9% earning taxable income over Rs.5,00,000.

Tuition Fees for full time education

Query: Can tuition fees paid for a child going to Play School or Nursery be claimed?  Can tuition fees paid to Coaching Classes for an HSC student be also claimed?

Reply: ‘Tuition’ as defined by the Oxford’s Dictionary means ‘teaching or instruction.’  There can be no restriction regarding the age of the child or class of study, as long as the fees paid are in the nature of tuition fees.  There is no reason why a School should not include a Play School or a Nursery, which facilitate pre-school learning.

Section 80C also refers to an educational institution, which would logically include a Coaching Class as well, where the student receives teaching or instruction.  In this context, the words ‘for the purpose of full time education’ under Section 80C must be rationally interpreted and accordingly in respect of a child who is pursuing full time education, payment of tuition fees to his School, as well as the Coaching Class (an educational institution), should very much qualify for deduction under Section 80C.

Query: Many schools or institutions use various nomenclatures for Tuition Fees, such as Term Fees, Class Fees etc.  Can such Term Fees or Class Fees etc. be claimed as a deduction?

Reply: What Section 80C discourages for purposes of deduction is the payment of any development fees or donation or payment of similar nature.  However, fees which are in nature of tuition fees, by whatever name called, can certainly be claimed as a deduction, keeping in view the legislative intent for granting the benefit.

CEA also allowable

Query: Can a salaried employee receiving Children’s Education Allowance (CEA) and claiming it exempt under Section 10(14) of the I.T. Act, also claim separate deduction under Section 80C in respect of the tuition fees paid?

Reply: The benefits of Section 10(14) and Section 80C are quite independent and hence there should be no bar in claiming both the benefits as prescribed. You may also be in a position to logically argue that you are using the exempt CEA amount for meeting expenses of your children’s education, other than tuition fees, in respect of which you are not entitled to claim deduction under Section 80C.

Certification required

Query: What certification or proofs are required to be attached with a taxpayer’s return of income in support of the claim for deduction under Section 80C?

Reply: If you are a salaried employee, you should give the relevant proofs to the Officer in Charge for deducting TDS, who is required to allow you the deduction and certify it as available in your Salary Certificate.

In all other cases, the relevant proofs for payment of tuition fees should be made available for verification of your Assessing Officer in case your case is selected for scrutiny. With effect from Assessment Year 2007-08, no annexure in this regard is required to be attached with your Return of Income.

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