Understanding Educational Allowance and Tax Exemption for Childrens Education: Insights and Clarific

Dear all,

Can anyone please shed light on the educational allowance? Presently, it is allowed up to Rs 100 per child per month. Now, I understand that it has been revised to Rs 1000 per month per child. Can anyone clarify this?

Regards,
Rajat

Dear Mr. Joshi,

This is purely based on the kids one have, especially if they attend school. Normally, one has to produce the fee receipt if their kids are going to school. The receipt will only include tuition/term fees and not other charges such as transportation, uniform, function, or capitation-based fees. Tax rebate will be available upon presenting the necessary fee receipt copies; otherwise, it will be considered as taxable salary. I understand that this benefit is only applicable for the first two kids if they were born in different years/occasions or if they are twins/triplets.

Bye :)

Hi Folks,

Thanks for your responses.

I discussed this issue of Rs 1000/- per month per child with CAs & experts, and it was clarified that this is only applicable if the Educational Institution is run & maintained by the company where the employee's children are provided education; only then this is applicable.

Under section 10(14)(ii) read with Rule 2BB(2), children's education allowance qualifies for an exemption of Rs 100 per month per child subject to a maximum of two children, and any allowance granted to meet the hostel expenditure of the employee's children qualifies for an exemption of Rs 300 per month per child subject to a maximum of two children. The issue that has been raised is probably because the allowance in the instant case is granted as a children's education allowance to meet the expenditure of the employee's child's education, which is in the nature of admission fee, tuition fee, cost of books, uniform, hostel expenditure, and transportation.

It can be seen that though the allowance is termed as 'children's education allowance,' the said allowance is also meant to meet the expenditure on hostel accommodation of the child.

It is in this background that the issue has been raised as to whether the exemption will be restricted to Rs 100 towards children's education allowance or whether the exemption of Rs 300 being hostel expenditure allowance can also be claimed.

It can be seen that Rule 2BB(2) refers to 'children education allowance' and 'any allowance granted to an employee to meet the hostel expenditure of his child.'

A plain reading of the Rule makes it clear that so far as hostel expenditure is concerned, what is relevant is that the allowance should have been granted to meet the hostel expenditure of the child.

Cheers,

Rajat