The cost of educating our children is rising consistently. It’s a matter of concern for all of us. One relief is the tax benefit provided for spending on children's education. The Income Tax Act provides a direct deduction on account of fees paid for the education of dependent children. The act also provides for deduction on account of interest on loans taken for higher education of children.
This deduction in respect of school fees is covered under Section 80C of the I-T Act. A parent can claim a deduction of payment made for tuition fee to any university, college, school or any other educational institution. The deduction on payments made towards tuition fee can be claimed up to Rs 1 lakh, together with deduction in respect of insurance, provident fund and pension. But, there are certain conditions to get this. It can only be claimed in respect of two dependent children and for fees to an educational institution within India. And, for tuition fee only. Payment as donation or development fee to an educational institution does not qualify.
ON INTEREST PAID
You can also get the benefit of direct deduction on the interest paid for a loan taken for the purpose of higher education. This is available under Section 80E of the I-T Act. This benefit can be claimed for a loan taken for education of yourself, your spouse, your children and the child for whom you are a legal guardian. It can be claimed for eight years in a row, beginning from the year when the interest payment starts.
As the benefit can be claimed by the parent as well as the child, the person taking the education can start claiming this deduction once he starts earning and paying the interest himself. There is no cap on the amount up to which the deduction can be claimed.
The loan in this regard can be taken from any financial Institution or charitable institution recognised by the central government. It can be claimed on a loan taken for education anywhere in the world.
The writer is with www.ApnaPaisa.com