Sending your kids to school / college? Here are a few tax saving tips

“Black and white shot of graduated student wearing cap and gown from behind, Eugene, OR (EUO)” by Cole Keister on Unsplash

Education is every person’s right and whatever you spend for the same, will bring you tax benefits.

Income Tax Act allows benefits for Education expenses in two ways:

1. Deduction for Tuition fees paid &
2. Deduction for Interest paid on Higher Education Loan

Let’s have a look at both the benefits in brief:

1). The amount paid as Tuition fees (excluding any payment towards any development fees or donation or payment of similar nature), is allowable as deduction under Section 80C of the Income Tax Act. The deductions allowable under this section are as follows:

• Any amount paid at the time of admission or thereafter,
• to any university, college, school or other educational institution situated within India
• for the purpose of full-time education of children (upto maximum of two children of the individual)
• Maximum Rs. 1,50,000 can be claimed as deduction (as maximum deduction allowed under section 80C is Rs. 1,50,000)

2). Any amount paid by an individual by way of Interest on loan taken by him/her for the purpose of pursuing Higher Education is allowable as deduction under section 80E of Income Tax Act:

• Deduction shall be allowed in respect of the initial assessment year and seven assessment years immediately succeeding the initial assessment year or until the interest is paid by the assessee in full, whichever is earlier.
• The loan must have been taken from an approved charitable institution or a financial institution
• The loan could have been taken for the higher education of the assessee or his/her spouse or children or students for whom the assessee is a legal guardian.
• Deduction allowed under section 80E is 100% of the interest paid.