X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Are you using education expenses for tax planning purpose? - Outside View by PersonalFN

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Are you using education expenses for tax planning purpose?
Feb 20, 2015

Education can not only make an individual knowledgeable but also help to achieve his / her financial goals. It is said that any amount invested in education does not get wasted if applied prudently. Nelson Mandela (an anti-apartheid revolutionary and politician) has so beautifully said, "Education is the most powerful weapon which you can use to change the world."

Recognising this power of education which can do well to the society at large, the Income-Tax Act, 1961 too provides benefits to individuals.

PersonalFN through this article, brings to you how you can use education expenses for tax planning purpose.

  1. Tuition fees paid for children's education

    As a parent if you are paying tuition fees towards your children's education to any university, college, school or other educational institution situated within India, you can claim a deduction under Section 80C of the Income-Tax Act, restricted a sum of Rs 1,50,000 and up to a maximum of 2 children. If someone has four children, then the husband and wife both can enjoy a separate limit of two children each, so they can separately claim deduction (up to Rs 1,50,000) for 2 children each, subject to the amount they have actually paid.

    However, it is important to note that tuition fee only is eligible for deduction and the following expenses cannot be claimed by you under this section.


    • Fees paid for distance learning courses or part-time education
    • Fees paid for coaching classes or private tuitions
    • Admission fees
    • Donations
    • Development fees
    • Term fees
    • Late Fees
    • Fees paid for education of spouse
    • Expenses incurred for self-education
    • Expenses incurred for transport, library, hostel or mess etc.

    You must also note that this deduction can be claimed only by an individual assesse and not by Hindu Undivided Family (HUF).

  2. Interest on loan taken for higher education

    If you as an individual have taken an education loan for "higher education" for yourself, your spouse, your children, or for any person (minor) for whom you are the legal guardian, then the interest paid on such a loan can be claimed as a deduction under section 80E of the Income-Tax Act. The deduction is available for a maximum of 8 years or till the interest is paid, whichever is earlier. So, to simplify it further, the deduction is available from the year in which you start paying the interest on the loan, and the seven immediately succeeding financial years or until the interest is paid in full, whichever is earlier.

    Some important points to remember while claiming this deduction are:


    • If you wish to claim this deduction, then the loan has to be taken from a bank, an approved financial institution or an approved charitable institution

    • "Higher education" means full-time studies for any graduate or post-graduate course pursued after passing the Senior Secondary Examination or its equivalent from any school, board or university recognised by the Central or the State Government or local authority or any other authority authorised by the Central or the State Government or local authority to do so. However, no deduction is available for part-time courses

    • HUFs are not allowed to claim deduction under section 80E

  3. Education allowance

    If you are married with kids, and if your employer is providing with education allowance, then do not refrain from availing it, as this can again help you in reduction of your tax liability.

    Some important points to remember while claiming an exemption here are:


    • The exemption extended to you under the Income-Tax Act is Rs 100 per month for a maximum of two children (i.e. in other words Rs 2,400 p.a. totally)

    • Similarly, if your children are staying in a hostel then a maximum of Rs 300 per month per child, but subject to a maximum of two children will be available to you as an exemption (i.e. Rs 7,200 p.a.)
PersonalFN believes that educating your children, or even yourself, is imperative for building a responsible society and even for long term financial wellbeing. Hence, it should not be ignored. Moreover, if you plan your taxes wisely, then the amount spent for education purpose will become cost effective.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.

Disclaimer:

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

Equitymaster requests your view! Post a comment on "Are you using education expenses for tax planning purpose?". Click here!

  

More Views on News

Sorry! There are no related views on news for this company/sector.

Most Popular

How to Avoid a 90% Loss Suffered by This Super Investor(The 5 Minute Wrapup)

Jul 12, 2018

Blindly following super investors is a dangerous game to play. Here's how you can avoid such mistakes.

The Answer to Your Wealth Worries: Small Caps (Especially Now)(Profit Hunter)

Jul 10, 2018

If you're worried about the markets - you are on the wrong track. This is opportunity - put your wealth-building hat on, instead - Richa shows you how...

The Multiple Problems with the Minimum Support Price (MSP) System(Vivek Kaul's Diary)

Jul 11, 2018

The price signals that MSP sends out, creates its own set of problems.

New Fund Offer - ICICI Prudential Pharma Healthcare and Diagnostics Fund - Should You Invest?(Outside View)

Jul 6, 2018

ICICI AMC launches an open -ended equity fund following Pharma, Healthcare, Diagnostic and allied theme.

When Disappointment Panda is Around. Buy Quality Stock like This!(Chart Of The Day)

Jul 6, 2018

Buy Companies that can fight all kinds of Pandas and Bears in the long run.

More

Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

MARKET STATS