Tax Benefits of Education Expenses | H&R Block

How Do Education Expenses Affect My Taxes?

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Tax Benefits of Education Expenses

 

Education expenses are increasing by the day. Education being the basic necessity of life is an undisputable expense and hence cannot be avoided. In India quality education comes at a premium cost. The good news is that these expenses can be claimed as a tax deduction thereby reducing the tax burden. Expense based deductions are always a breather since they provide tax deductions for certain unavoidable expenses that are required to be made and don’t entail extra funds to be kept aside for investments to claim tax deductions.

Education expenses in the form of loan taken or tuition fees paid for children’s education not only funds your expenses but also help you save taxes.

Tuition fees paid for education of children can help in claiming deduction u/s. 80C up to Rs.1, 50,000/-. For claiming the same, following information is necessary:

  • It is only applicable for individual assessee and not for HUF.
  • Assessee can claim tuition fees paid for two children only.
  • One cannot claim tax benefit for expenditure incurred for self or spouse.
  • It is only applicable on payment basis and not for part time courses.
  • Tuition fees paid for private tuition, coaching classes is not eligible; it should be paid to university, college, school or other educational institution.
  • Location of the institute should be within India though it can be affiliated with foreign institute.
  • Nursery and play school (pre-nursery) fees are also covered under this section.
  • The following expenses are not allowed to be claimed under this section:
  1. Development fees or donation.
  2. Transport charges, hostel charges, mess charges, library fees, scooter/cycle/car stand charges, late fees, term fees etc.

In other words, only the fees paid as education fees for children are allowed for deduction.

Now the question is assessee (individual) has taken loan for higher studies can one get benefit?

Yes one can claim the deduction for the interest amount paid on education loan taken, u/s 80E without any upper limit.

Following are the important points related to Section 80E:

  • Deduction can be claimed by individual if the loan taken in his name. Loan should have been taken for full-time higher education of self or relative. Relative is defined to mean thespouse and children of the individual.
  • Loan should be taken for higher education; it means full-time studies for graduation or post-graduation courses. The benefit is not available for part time courses.
  • Education Loan should have been taken from a bank in India (including Indian branches of foreign banks). Loans from notified financial institutions (currently only HDFC is notified) and approved charitable institution are also eligible for Section 80E No deduction would be available if the loan is taken from a bank outside India.
  • Deduction under Section 80E is available for 8 years or until the loan is repaid fully, whichever is earlier.First year starts from the year in which interest payment starts. Thus if the loan repayment stretches beyond 8 years, no benefit is available from 9th year onwards.
  • No tax deduction on education loan under section 80E will be available for the principal amount of loan, it is only applicable for the interest amount paid.

To avail the tax benefit on education expenses one can declare this in the tax declarations for the year so that less TDS is deducted from the salary, or else you can claim it by filing tax returns. Education loan and tuition fees for children’s education expenses are some great opportunities to save taxes that must be availed.

 

Ritika Patel
Ritika Patel
Ritika has been working as a Tax Advisor with H&R Block for a year. She is an MBA and looks after individual taxation. She also assists in client relationship management.

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