Tuition Fees Exemption In Income Tax (2023 Guide)
Educating a child is a costly affair for most parents. Given the rising cost of quality education, it seems unlikely to save money. However, there are tax incentives that can be claimed under the provisions of the Income Tax Act. One such clause under the Income Tax Act is Section 80C.
Section 80C contains provisions for tax deduction incentives, including tax incentives for tuition fees. Learn more about tuition fees exemption in income tax in this article.
Who Is Eligible to Claim a Deduction for Tuition Fees?
Taxpayers seeking tuition fees exemption in income tax 2022-23 must ensure they meet the following criteria:
The tuition fee tax deduction is only available to individual taxpayers and Hindu undivided families (HUF). Corporations are not subject to Section 80C deduction tax.
The maximum deduction under Section 80C is Rs.1.5 lakh per financial year. A deduction for two children is permissible for each taxpayer. If both parents are taxpayers, they can claim deductions for four children. A single assessee cannot claim the cost of educating more than two children.
Only applicable to a child’s education
Tax is claimed on tuition fees paid to educate the children of taxable persons. Education expenses paid for by the taxpayer himself or his or her spouse cannot be deducted.
Individuals may claim deductions on tuition fees paid for full-time courses only, including tuition, undergraduate or postgraduate course fees. Fees for part-time courses are not chargeable.
The school, college, or university where the child is studying should be affiliated with the appropriate educational body.
What Is the Maximum Deduction for Tuition and Fees?
The tuition fee deduction from income tax is a provision for claiming a tax deduction for the tuition fees that parents pay to educate their children. Parents can claim up to Rs 1.5 lakh for a tax deduction. They can claim tuition fees under 80C to ensure tax savings if additional tax savings are required.
For clarity, let’s look at an example.
Let’s take an example to understand.
Suppose Mr. Kartik is an employee and has two children. He pays his son INR 45,000 and his daughter INR 35,000 annual tuition. The total tuition fee paid by Mr. Kartik is INR 80,000 per year.
Therefore, he can claim this payment as a tuition deduction from his income tax. This provision helps him save taxes and claim a large amount of tax.
Which Educational Expenses Are Not Eligible to Claim as Tuition Fees Expenses?
The following expenses are not included in the tuition fee.
- One-time admission fee
- Annual fee
- Transportation costs
- Additional class fee
- Fees for Curriculum Activities
- Smart class fee
- Expenses for sports and activity classes
- Cost of coaching or private lessons
- Dormitory fee
- Mess fee
- Library fee
- Stationary costs.
- Donations to schools/universities.
- School development costs
- Late payment of tuition
- Redemption fee
(This is not an exhaustive list.)
For non-tuition exemptions, the above exemptions apply.
There are a number of other exclusions that, despite being tuition fees, cannot be claimed under the Section 80c income tax deduction.
- Tuition fees for part-time studies
- Tuition fees paid at foreign institutions/universities/universities.
- The tuition fee is paid for you, your spouse, brothers, sisters, and relatives, not your children.
- Tuition fees for Indian schools abroad.
What Is Form 12BB?
Form 12BB is an investment statement filed by an employer to claim tax benefits or reimbursements for employee investments and expenses. This reduces the employee’s tax burden as TDS is deducted from gross adjusted income. Form 12BB applies to all salaried taxpayers. It must be submitted with valid proof of investment and expenditure.
Below are the deductions you can claim through Form 12BB.
- House rent allowances (HRA)
- Leave travel allowance (LTA)
- Interest payable on a home loan
- All deductions specified under Chapter VI-A
What Is Form 12BB Filling Example?
Mr. Vijay has a taxable salary of Rs.6,00,000, income from home ownership of Rs.60,000, interest on a fixed deposit of Rs.10,000, and an investment of Rs.1,50,000 under Section 80C.
Let’s see the TDS to be deducted by the employer, in case Mr. PVijay has submitted Form 12BB along with investment proofs to the employer, or if he has made an investment declaration at the beginning of the financial year but has not submitted Form 12BB at the end of the year:
|TDS to be deducted by Employer (If Form 12BB is submitted||Amount (Rs)||TDS to be deducted by Employer (If Form 12BB is not submitted at the end of FY)||Amount (Rs)|
|Income from Salary chargeable to tax||6,00,000||Income from Salary chargeable to tax||6,00,000|
|Income from House Property|
|Income from House Property|
|Income from Other Sources- Fixed Deposit Interest|
|Income other Sources- Fixed Deposit Interest|
|Gross Total Income||6,70,000||Gross Total Income|
|Less: Deductions u/s 80 C||1,50,000||Less: Deductions u/s 80 C||–|
|Taxable Income||5,20,000||Taxable Income||6,70,000|
|Total Tax Liability||17,160||Total Tax Liability||48,360|
|*Tax Calculation: Rs.5,20,000 – 2,50,000 (Basic Exemption)= Rs. 2,70,0005% x 2,50,000= Rs.12,50020% x 20,000 = Rs. 4000Education cess of 4% = Rs. 660|
Total Tax = Rs.17,160
|*Tax Calculation: Rs. 6,70,000 – 2,50,000) (Basic Exemption) = Rs. 4,20,000 5% x 2,50,000= Rs.12,50020% x 1,70,000 = Rs. 34,000Education cess of 4% = 1860|
Total Tax = Rs.48,360
|TDS to be deducted by Employer for the Financial Year||17,160||TDS to be deducted by Employer for the Financial Year||48,360|
|TDS to be deducted by Employer per month||1222 p.m||TDS to be deducted by Employer per month (considering investment declaration) From April-January.||1222 p.m or 12220 for 10 months|
|–||–||TDS to be deducted by an employer in last two months (February & March), in case Form 12BB with proofs are not submitted.||36,140|
In the past two months (February and March), he is deducted 36,140 TDS because Form 12BB was not submitted to his employer along with the investment proofs. This will result in an excess TDS deduction of Rs.31,200 (48,360 – 17,1600).
Thus, if Mr. Vijay fails to file an investment statement or Form 12BB (along with any supporting documentation). He may continue to claim deductions at the time of his ITR submission and his TDS refund (if applicable).
How Do I Fill My Tuition Fee in ITR?
Salaried employees must fill out Form 12BB to claim tuition deductions, along with the required documentation to support the claim. However, self-employed may apply for tax benefits under Section 6 of the Income Tax Return (ITR). Tax savings on tuition fees can be put toward long-term investments in child education, and can also alleviate short-term financial pressures.
What Is GST on Private Tuition Fees?
Tutors, tutoring centers, and coaching centers do not offer services covered by legally recognized vocational training programs. They are taxable at 18% GST rate.
Are Tuition Fees Counted as Income?
Yes, tuition fees count as income. Tuition fees are considered an expense for those who pay them, not an income for those who receive them.
Tuition income is taxed as either “income from other sources” or “income from business/profession”. The amount of income from tuition fees depends on the taxpayer’s main source of income.
If an individual’s primary source of income is not tuition income but other sources of income, and the tuition income is additional income, then tuition income is taxed as income from other sources.
Income from an individual’s tuition fees is taxable under the heading “Business/Professional Income” if the income from tuition fees is the individual’s primary source of income.
Is Tuition Income Covered under 44AD?
Tuition income can be covered in 44AD if it meets the following conditions:
- Turnover should not exceed Rs. 2 Cr during each financial year. (5cr from next year)
- If section 44AD is chosen, it cannot be reversed for five years. Otherwise, no return can be filed under Section 44AD for the next five years.
- If income is reported in 44AD, taxable income must be at least 6% of bank sales and 8% of cash sales.
FAQs: Tuition Fees Exemption In Income Tax
Where do you put tuition on tax returns?
Tuition fees paid are tax deductible under Section 80C.
Can I claim tuition fees on my taxes?
For tax years 1996 and beyond, paid tuition or exam fees can be claimed if they are not used to calculate tuition or exam fees.
Can I claim the deduction for my child studying outside India?
Only India-based institutions are eligible for tax incentives. Includes international affiliates with local campuses.
Can a taxpayer with three children deduct tuition fees under Section 80C?
A taxpayer with three children can deduct tuition fees under Section 80C, but both parents must be taxpayers.
Can you claim tuition fees for an adopted child on your tax return?
Yes, any legal guardian of a child can claim tax benefits, but only for two children.
In India, the average cost of education is about Rs. 10,000. Depending on your postgraduate degree and above, tuition fees may be doubled. Now that you know how to get your tuition tax deduction, make the most of it. If you can prove the tuition fees you paid for the year, you can easily file a tax claim.
Hope the information in this article is able to tell you everything you need to know regarding Tuition Fees Exemption In Income Tax.
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