You know that Section 80C is one of the most popular avenues of saving income tax.
(Check out “Saving Income Tax – Understanding Section 80C Deductions” for the full details)
Many of the avenues covered by Section 80C are quite well known, but one things that gets missed by most people is children’s education expenses.
Let’s have a look at what can and what can not be claimed as a deduction when it comes to education expenses and Section 80C.
How much deduction can be claimed? How much tax can you save?
This is part of Section 80C, so the deduction limit for Section 80C applies (Rs. 1,00,000 for FY 2011-2012).
(Related reading: Income Tax (IT) Jargon – Financial Year (FY), Assessment Year (AY) and Previous Year (PY))
So if you fall in the highest 30% tax bracket, you would be able to save up to Rs. 30,000 in income tax.
(Related reading: Latest Income Tax (IT) Slabs / Brackets and rates)
Which education expenses are covered?
Here’s the most important question – which of the expenses incurred for your kids’ education are covered, and which are not?
The answer is quite short: Only tuition fees are covered.
Other fees, like hostel expenses, transportation fees, capitation fees, donation, etc are not covered.
Who is covered?
Only the fees paid for your children are covered. Any fee paid for yourself or your spouse is not covered.
How many children are covered?
Tuition fee paid for up to 2 children are allowed.
If you have education expense for more than 2 kids, you can choose to claim deduction for the tuition expense of any 2 children.
However, keep in mind that the limit of 2 children is per assessee. So if you are your spouse are both income tax payers, each can claim deduction of education expenses for up to 2 children. Of course, each of you should have actually paid the fees for the respective children.
Which courses are covered?
Only the fees paid for full time courses are covered. Any fee paid for part time courses or distance learning courses are not covered.
All courses offered by recognized institutions like universities, colleges, schools, and other recognized educational institutes are covered.
Fees paid for tuition classes or coaching classes are not covered. However, the fee paid for play school and nursery is covered under Section 80C.
Other things to consider
- The deduction is available as and when the fee is actually paid, not when it is due. So if the fee was due in March 2012, but is actually paid in April 2012, it can be claimed as a deduction in FY 2012-13, and not in FY 2011-12.
- Deduction is available only if the fee is paid to an institute physically located within India. The institute can be affiliated to a foreign university or another foreign institute.
- Deduction can also be claimed for the educational expenses incurred for an adopted child
- The deduction is available only to individual income tax assessees, and not to a Hindu Undivided Family (HUF)
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