Income Tax Liability On Your Education Allowance

Education Allowance – Income Tax Liability for Free Education Any education allowance you received for your children will be exempted to the extent of following;

  1. Rs. 100 per month per child up to a maximum of 2 children to meet the cost of education and
  2. Rs. 300 per month per child up to a maximum of 2 children as hostel expenditure.

If you have twins after the first child then you will be eligible for all of your three children to claim the exemption.

Free educational facility and training to employees will not be chargeable to income tax.

If your employer reimburses the school fee of your children then the entire amount will be treated as perquisite and will be charged to income tax. Treatment will be same if the employer paid the school fee on behalf of employee. 

Employer maintained Educational facility

If your children are getting education at the employer’s maintained or owned educational facility then up to Rs. 1,000 per month per child (no restriction on number of children i.e. if you have more than 2 children then you can claim for all of your children) will not be taxed. If the amount exceeds Rs. 1, 000 per month per child then taxable perquisite will be calculated as follows;

Taxable perquisite = Cost of education in a similar institution in or near the locality – Rs. 1, 000 per month per child – amount recovered from the employee

If the educational facility is provided to any one who are not your children and the cost of education in similar institution in or near the locality will be reduced by the amount recovered from employer to calculate the taxable perquisite amount.

If your employer has provided any scholarship which is not part of the terms and contracts signed by you both then the entire amount will not be charged to income tax.

If you have paid any tuition fee from your pocket for the education of your children then you may claim income tax deduction up to a maximum amount of Rs. 1, 00,000 while filling your income tax return.

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