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Children develop their skills through education. As a parent, you must invest a lot of money in schools and colleges. You can get tax exemptions for all your children's fees.
To ensure quality education, the Income Tax Department provides specific tax provisions. Thus, allowances ensure the quality of education for the children. To balance the fees incurred by schools, you can get a good tax return on education investment.
The best way to ensure quality education for children is through child plans. By doing so, you can combat the inflation in the cost of education.
In this blog post, we'll discuss child education allowances. These are based on tax provisions, their eligibility, and how to claim them.
Children's Education Allowance Deductions
The tax provisions that assist your CEA are listed below. It covers all fee structures like tuition, hostel, and extracurricular fees.
- Section 80 C of the Income Tax Act
- Section 10(14)
- Central Government employee category
These tax provisions are suitable for both salaried and contract workers. Let's look at the requirements in detail.
Children's Education Allowance Under Section 10 (14)
Income Tax Act section 10(14) provides education allowances to all Indian employees' children get the education allowance under section 10(14).
The two types of fees which get the eligibility for tax exemptions are education and hostel fees.
Education fee allowance
If your family has two children, each will get ₹100 per month. Thus, a yearly exemption limits the rupee to ₹2,400.
Hostel fee allowance
If your children stay in the hostel for study, you will get rupee ₹300. Thus, the yearly exemption limit is ₹7,200.
Thus, 9,600 per year is the upper limit for tax exemptions under section 10(14).
Section 10(14) act covers the following fees in the schools.
- Tuition fee (Fee-related to admission, practical, extracurricular activities)
- Miscellaneous fee (if included in the school bill)
- Books and notebooks fee
- School uniform fee
But, expenses on transportation and stationeries will not be eligible for reimbursement.
Eligibility for Children's Education Allowance
Twenty years is the maximum age limit for typical children. But, if your child is physically challenged, the maximum age limit is set as 22 years.
Nursery children have no age limit under section 10(14). However, differently-abled children must be five years old to claim CEA.
Eligibility criteria for Children's Education Allowance under 80 C
- Tax exemption for two children
If you are a couple with two children, both children come under the tax exemptions. But, the maximum limit of exemption is 1.5 lakh.
- Adopted child tax exemption
Even if you have an adopted child, their fee can be filed for tax return.
- Tax limit for a financial year
The maximum tax limit for a financial year is 1.5 Lakh. However, if your spouse is also working, you can claim 3 lakh.
- Affiliation of the school
Your children must be studying in a school with state or central government affiliation.
- Regular full-time studies
Tax exemptions are available for students who are in full-time studies.
- Children's tuition fee
The tax department only considers the children's expenses. Fees of other persons in your family, like spouses, siblings or parents, are not assessed.
- Institutions in India
Your children should study in institutions in India, not foreign lands.
- Applicable only for school children
Fees for school-going children are accepted for the tax exemptions. College fee or other study fee is ignored from the tax deduction.
Claiming Children's Education Allowance
Education allowance comes under sections 80 C and 10(14) differ. However, the claiming process involves submitting an application and proof of payment. The steps involved in claiming the education tax deductions are
For employees getting a salary
Getting a bona fide certificate from your children's educational institution is necessary. In addition to that, the fee receipt covering all the school fees is needed.
Note: Getting the relevant fee receipt for section 80 C and section 10(14) is necessary. Also, the claims can be done separately.
The fee receipt and the declaration form of 12BB must be submitted to the employer. These are the investment proofs to present at the end of the financial year.
For contract or non-salaried workers
If you are a non-salaried employee, you must claim the tuition fee under the VI-A schedule of section 80 C. You can file a usual income tax return without Form 12 BB. But, fee receipts or other payment proof from the education institution must be held back.
The Children's Education Allowance for Central Government Employees
If you are a central Government employee getting a salary under the 7th pay commission, this tax exemption is for you. You can claim your children's tuition and hostel fees.
Eligibility for the Children of Central Government Employees in Children Education Allowance
Your children must study in any educational institution recognized by the Government of India.
Hostel fees can be reimbursed if your child stays 50 Km away from your posting area.
Let's look at a comprehensive table showing the fee allowances before and after the 7 CPC commission.
Kind of allowance |
Before the 7th Central Pay Commission |
After 7th major pay commission |
Education fee |
₹1,500 |
₹2,250
|
Hostel fee
|
₹4,500
|
₹6750
|
Taxation Rules
EPF Withdrawal Condition |
Taxation Rules |
More than Rs. 50,000 ( <5 years of service) |
|
After completing 5 years of service |
No TDS |
Transfer from EPF to NPS (National Pension Scheme) |
No TDS |
Conclusion
Children's Education Allowance (CEA) is a significant step of the Indian Government in promoting literacy. Further, it alleviates the financial stress due to educational expenses.
You can utilize both Section 80 C and Section 10 (14) provisions against the fee payment for your children. Section 80 C covers tuition fees only. Other costs like transportation, books, and extracurricular fees can be claimed under section 10(14).
Check out the TATA AIA child insurance plans for securing your child's future education during emergencies. Also, insurance plans can be used as collateral for educational loans.
