Children Education Allowance & Hostel Allowance | Tax Saving Tips

What is Children Education Allowance?

Government of India offers a tax exemption of Rs 100 per child for a maximum of two children in a family. This is for the educational purpose of the children and is known as Children Education Allowance. A normal child of under 20 years of age, is eligible for this plan. Thus, an annual claim benefit of up to Rs 2400 maximum is available under this allowance. This claim falls under Section 10 (14) of the Income Tax Act.

What is Hostel Allowance?

The Government of India also offers tax exemption of Rs 300 per child for a maximum of two children in a family. This is for any hostel expenditure for the children and is known as Hostel Allowance. Thus, an annual claim benefit of maximum Rs 7200 is available for this. This claim also falls under Section 10 (14) of the Income Tax Act.

What is Tuition Fees Exemption?

Under Section 80C of the Income Tax Act, parents can get the Tuition Fees exemption for their children who are studying in schools or colleges or universities. This exemption is limited to two children in a family. A maximum of Rs 1.5 lakh exemption is allowed. If both parents are working, then both can individually claim for this exemption. The total tuition fee exemption should add up to a maximum of Rs 1.5 lakh when one combines the exemptions for Sections 80C, 80CCC and 80CCD under the Income Tax Act.

Learn about Code On Wages Bill, 2019 and its Complete Analysis to understand its depths.

All schools, nurseries, play-schools, creches, colleges and universities tuition fees fall under this exemption bracket. Although this exemption is only allowable on the tuition fees and other amenities fee do not fall under this. Additionally, the exemption is available for full-time courses only. And not for distance learning or part-time courses. Furthermore, the exemption is unavailable for children studying in foreign schools and universities.

Total Tax Savings for Children Education?

A maximum exemption of Rs 1,59,600 (2400+7200+1,50,000) is available for up to two children. This includes the exemptions for children education allowance, hostel allowance and tuition fees. According to the tax bracket, you fall into, you can save anywhere from Rs 7980 to Rs 47880 annually. Furthermore, both parents can claim exemption separately if they are both working professionals. Thus, your savings will double!

How to claim exemptions?

• Keep all the receipts of all fee payments safely.
• Salaried employees have to give a declaration to their employers, through the form filing process.
• Self-employed people have to claim the exemptions while filing their income tax, under Section 6A.
• Both tuition fee allowance and children fee allowance are separately claimable.

Do watch our quick informative video on this topic below!

Also read, Leave Travel Allowance (LTA) | How To Claim Income Tax Deduction and House Rent Allowance (HRA) | Calculation & Exemption Rules

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