Three types of tax benefits available for studies


Education has the potential to improve the quality of life of individuals at a geometrical rate of progression. The government also provides some taxpayer relief in this regard. Let us discuss the benefits available under the tax laws in India in the education setting.

Section 80 C deduction for full-time education expenses in India

You can claim a deduction of up to Rs. 1.50 lakh each year for tuition fees paid for up to two children, regarding full time education in India. This deduction is not exclusive but is available with other eligible elements such as the contribution to the contingency fund and the PPF, the repayment of the mortgage loan, the life insurance premium, etc. This benefit is available for education in any school, college, university or any other educational institution in India. Since this only covers expenses for the full training, payments made to institutes or coaching classes are not eligible for this deduction.

It is important to note that the deduction is only available for tuition fees and that other payments such as any donation or development costs under any name are not eligible for this deduction. If you have more than two children in full-time studies, you can only claim this deduction for two children of your choice. However, if your spouse is also working, the other parent can claim a deduction for other children as well. In case the fee paid for two children exceeds the limit of Rs. 1.50 lakh, the excess fee can be claimed by the other parent. There is no prohibition on both parents claiming a deduction for the same children, but double deduction is not allowed for the same expenses. Please note that the deduction under section 80 C is only available for full-time studies, so this deduction cannot be claimed for any correspondence course. Additionally, this deduction is available for education in India, so you cannot claim a deduction for expenses paid for education outside India.

Tax benefits for interest paid on the student loan

In addition to the above tuition benefit, a person can claim the deduction of interest paid on the student loan taken to finance the higher education of certain parents under Section 80E. Higher education for this purpose means any course of education undertaken after the completion of the upper secondary examination. You can claim this benefit for yourself, your spouse and any number of your children. You can also claim this deduction for a child for whom you are the legal guardian.

This deduction can be claimed for eight consecutive years from the year you start repaying the loan. It should be noted that this deduction can only be claimed on the basis of payment. Thus, if you pay late interest on your student loan in a given year, you will be able to claim all of the interest paid during the year, regardless of the year to which the loans relate. interests. Unlike home loan where you can claim a deduction up to specified limits, there is no monetary limit for claiming the student loan interest deduction.

In addition, you can claim this deduction for student loans taken for part-time and full-time courses, unlike the deduction provided for in section 80 C for tuition fees. It is interesting to note that this deduction is available for loans taken for education anywhere in the world unlike the tuition deduction where the educational institution must be located in India.

To be able to claim this deduction, the loan must be taken out with a financial institution or an approved charitable institution. The financial institution for this purpose includes any bank or any other institution approved by the government. The charity should also be recognized as such by the central government. So if you borrow from friends or relatives to finance your education, you cannot claim this deduction.

If you take out a loan for full-time study in India, you can claim an interest deduction for this loan under section 80E as well as for tuition fees paid under section 80 C.

Exempt allowance for employees

In addition to the two advantages explained above which are available to all taxpayers whether they are employees or self-employed, the tax legislation also allows the exemption of certain allowances granted by the employer to an employee. The first of these exempt allowances is the education allowance received from your employer up to Rs. 100 / – per month each for two of your children. The second exempt allowance is the household allowance paid by the employer at the maximum rate of Rs. 300 / – for each child limited to a maximum of two children. It is important to note that the allowance will only be considered exempt if you have incurred the expenses against the allowance granted by your employer. In addition, you cannot claim these exemptions unless your employer grants you such an allowance as part of your salary.

I’m sure the above discussion will help you better understand the education tax benefits.

Balwant Jain is a tax and investment expert and can be reached on [email protected] and @jainbalwant on Twitter.

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