which education expenses are tax deductible? income tax deduction on tuition fees and expenses of school and college-going children in India can be claimed by a person employed in India under section 10(14) of the Income Tax Act.
Section 10(14) provides tax benefits of up to Rs 1,200 per year per child for up to two children for expenditure on education including tuition fees. An individual taxpayer can claim tax benefits under section 10 by spending tuition fees for a maximum of two children.
If a person has a taxpayer spouse, then the spouse can claim two more children.
Section 80C provides for tax deduction benefits including tax benefits for tuition fee expenses. The maximum limit of income tax deduction allowed under section 80C is Rs. 1.5 lakh.
Suppose the taxpayer has a higher tuition fee requirement or top priority for the same compared to other schemes eligible for income tax deduction under 80C. In that case, he can claim the entire 1.5 lakh income tax deduction for tuition fees alone.
However, if the taxpayer has other preferences like life insurance/investment/PF, then the whole income tax deduction limit of up to 1.5 lakh needs to be disbursed as per the taxpayer’s preference.
What is the eligibility for an income tax deduction for tuition fees?
Only an individual taxpayer can apply for an income tax deduction for tuition fees for his school or college-going children, provided the school is located in India. HUF is not eligible to apply for an income tax deduction on tuition fees.
Income tax deduction for tuition fees is applicable for a maximum of two children. If a taxpayer has a third child, the income tax deduction for tuition fees of that child can be claimed by the taxpayer spouse of the individual taxpayer. Each individual can claim an income tax deduction for the tuition fees paid for a maximum of two children.
If both husband and wife are individual taxpayers, then in such a family, income tax benefits can be claimed for a total of four school-going children, provided all the children attend schools located in India.
It is not necessary that only biological parents can claim tax benefits on tuition fees. Income tax deduction on tuition fees can be claimed by any individual taxpayer who is the legal guardian of school-going children, due to adoption or absence of a parent.
which education expenses are tax deductible
Income tax benefits for tuition fees can also be claimed by single parents and unmarried parents of school-going children if they are sending their children to authorized schools located in India.
Income tax deduction benefits on tuition fees under section 80C can be claimed only if the school is located in India and is a school recognized by the Government of India. The school can be a government, government, or private school.
It is important to note here that recognized schools affiliated with foreign universities/institutions or boards in India are also eligible for tax benefits on school tuition fees. Authorized junior schools, toddler schools, playschools, and coaches that educate children and are located in India are also eligible for an income tax deduction for tuition fee expenses of children.
However, Indian schools located abroad are not eligible for an income tax deduction for tuition fees under Section 80C of the Income Tax Act.
Income tax deduction benefits on school/college tuition fees can be claimed only for full-time courses. Part-time courses are not covered under section 80C and are eligible for an income tax deduction on tuition fees.
Income tax benefits for tuition fees can be claimed by a parent or guardian for dependent children attending school or college, who may be minors and above the age of eighteen years.
Which educational expenses do not qualify under the tax benefit for tuition fee expenses?
It is to be noted here that section 80C clearly states that income tax deduction on tuition fee payment can be claimed only for tuition fee expenditure and no other payment can be made to the school or college.
Generally, most of the authorized schools located in India issue bills and receipts for school fee payments. The school fee payment receipt mentions the categories under which the fee is charged.
The tuition fee is the amount charged by the institution for teaching the students. While claiming an income tax deduction for school fees expenses, the individual taxpayer is required to deduct only the amount mentioned under the head Tuition Fees. The following costs are not included in tuition fees
- one-time school admission fee
- Annual Fee
- Transportation costs
- Fee for extra classes
- Fees for Curricular Activities
- smart class fee
- Applicable costs for sports and activities classes
- Cost of taking coaching or private tuition
- hostel fee
- mess fee
- boarding fee
- cost of library
- fixed expenses
- tour fee
- school/college donation
- school college development work fee
- late school payment
- tuition fee
- (The above list is not exclusive)
The above exclusions apply to the exclusion of not having tuition fees. There are several other exclusions that the expenses cannot be claimed for income tax deduction u/s 80C even though tuition fees are there. These mainly include the following exclusions
- Tuition Fees for Part-Time Courses
- Tuition fees paid in foreign institutions/colleges/university
- Tuition fee is paid not for children but self, spouse, brother, sister, relative
- Tuition fees for Indian schools abroad
When an income tax deduction on tuition fees be claimed?
Income tax deduction on tuition fees can be claimed only in the following tax year when tuition fees have been paid. For example for tuition fees paid in the year 2018-19, income tax deduction can be claimed in the tax filing year 2019-20.
Thus the income tax deduction benefit on tuition fees is applicable only on the amount paid and not on the amount required to be paid.
How to claim an income tax deduction on tuition fee expenses?
To claim tuition fee expense for income tax deduction benefit, it is necessary to obtain a receipt of school fee payment for the entire financial year. Most schools operate from one financial year to another and individuals can ask the school to generate the school fee payment receipt for the entire financial year.
It is important that the fee is segregated under relevant heads and the tuition fee amount paid during the entire financial year should be mentioned under clear headers.
The procedures defined under sections 80C and 10(14) for claiming an income tax deduction on tuition fee expenses fall under two categories:
Tuition Fee Claimed by Salaried Individuals under Income Tax Benefit
Salaried individuals have to submit school fee receipts for the whole year as well as fill out Form 12BB to their employer.
Form 12BB is an investment declaration form by a salaried individual which mentions all the tax deductions and exemption claims made by the employee and includes income tax deduction benefits on tuition fee expenses.
The documents need to be completed and submitted before the end of the financial year.
The claim of Tuition Fee Income Tax Benefit by Non-Salaried Individuals
Non-salaried individuals can also claim income tax deduction benefits for tuition fees and expenses of children. While filing an income tax return form, a non-salaried person will be required to claim a deduction under section VI.
In section VI, the non-salaried taxpayer has to show the amount paid as tuition fee for the entire financial year and support his filing with the relevant fee receipt document.
Income tax treatment of education expenses other than tuition fees
In addition to tuition fees, certain education expenses may also allow individuals to receive income tax deduction benefits, including the following:
Hostel Expense Allowance
Persons working in India can claim income tax deduction benefits for Hostel Expense Allowance up to Rs 3600 per child per year, up to two children.
This income tax deduction benefit is available under Section 10(14) of the Income Tax Act, in addition to the tax deduction of the tuition fee of Rs 1200 per child per year for up to two children.
Education Loan Repayment Income Tax Deduction Benefits
Individuals can claim a deduction on the education loan repayment amount under Section 80E of the Income Tax Act. An education loan can be taken for pursuing higher studies in India or abroad.
which education expenses are tax deductible
Job-related education expenses
If you are an employee, you can deduct education costs that:
- Maintains or improves skills needed for your current job
- required by your employer
You cannot deduct education expenses if courses:
- not related to your job
- Qualifies you for a new business or profession
- The minimum educational requirements you must meet when you first got the job
To subtract these, itemize the deduction on Schedule A. Your deductions must exceed 2% of the adjusted gross income (AGI) limit for miscellaneous deductions.
Your job-related education expenses may also qualify you for other tax benefits such as:
- American Opportunity Credit
- Lifetime Learning Credits
Also, these expenses can make you eligible to claim more than one tax benefit. If you use separate expenses to figure out each benefit, you can usually claim as many benefits as you want.
Education expenses and self-employment
If you are self-employed, you can deduct the cost of education for your trade or occupation on Schedule C. You need to be able to prove that:
- Maintains or improves skills needed in your trade or occupation
- is required by law or regulation to hold his license to practice in his trade or profession
You can’t deduct education expenses if you:
- To meet the minimum requirements of your current business or business
- Which Qualifies You for a New Business or Business
This is true even if the education maintains or improves the skills you currently need in your business.
You can subtract:
- Tuition, Books, and Fees
- The learning equipment and other expenses – For example, You can deduct your research and typing expenses when writing a paper for a class.
- Transportation expenses – You can deduct the cost of traveling between your workplace and school. If you return to work after class, you can deduct the round-trip expense. You can also deduct public transportation costs.
You cannot deduct:
- Travel as Education – Example: A Spanish teacher who travels to Spain to improve his knowledge of the Spanish language cannot deduct his travel expenses.
- the dollar value of vacation time or annual leave you took to attend classes
Many deductible job-related education expenses may qualify for other education credits or deductions. It also includes
- an education credit
- employee-business expense deduction
See the tax savings of each method to maximize the return on your return.
To learn more about education spending, visit www.irs.gov:
- Publication 970: Tax Benefits for Higher Education
- Publication 463: Travel, Entertainment, and Gift Expenses
- Publication 535: Business Expenses