Education holds great value and importance in our life. Education promotes rational thinking and intellectual freedom. It improves our way of interaction with the world and our understanding of it. However, recently we are witnessing a rapid surge in education costs. Affordable education is increasingly becoming distant but rising cost should not stop us from becoming educated. Therefore, government offers tax deduction on education related expenses incurred by us. Under the Income Tax Act, such deductions are of two kinds. Let us understand both of them briefly.
According to a survey, average annual expenses of parents on a child’s education expenses like tuition fees, books, transport, uniform, stationary etc. went up from Rs. 35,000 in 2005 to Rs. 94,000 in 2011. This information sheds some light on the difficulties faced by the parents in educating their child. Fortunately, tax department gives some relief to parents in the form of tax deduction on expenses incurred by them in terms of tuition fees paid to any school, college, university or any other educational institution. However, you need to keep certain points in mind before you rejoice.
Deduction under this section is allowed for two children only and the maximum deduction allowed is Rs. 1,50,000. To claim this deduction, you have to actually pay the tuition fees. If the tuition fees asked by the institution is Rs. 50,000 but you paid only Rs. 40,000 in a Financial Year then you can only claim the amount mentioned later. Admission fees, payment as donation and late payment charges paid by you cannot be claimed as tax deduction. Remember that you can avail tax deduction only for tuition fees and not for other related expenses like transport, uniform, hostel etc.
To know more about tax deduction available for tuition fees paid, read this guide.
Deduction is not only available for tuition fees but also for education loan. If you have taken an education loan for your children, spouse or even yourself, then you can avail tax deduction u/s 80E of the Income Tax Act. If you pay the EMIs of education loan then you are eligible to claim deduction on interest component of it.
The best part here is that there is no upper limit of the amount you can claim as tax deduction. However, this deduction applies to loans taken for higher education only which means that full-time courses after 10+2 are eligible for it. Education loan taken from any financial or charitable institution can give you tax benefits but if you took financial aid from friends, family or relatives then you are out of luck.
You can get more knowledge on this topic by reading this guide.
I think now all of us can see how availing education has dual benefits. Along with the bag of benefits we already knew that we get with education, we also get tax benefits. So don’t miss out these benefits next time when you spend money on education.