When it comes to children, they are often viewed as a source of expenses for parents. However, the Indian Income Tax Act provides certain ex...
When it comes to children, they are often viewed as a source of expenses for parents. However, the Indian Income Tax Act provides certain exemptions that can be availed of in relation to children. These exemptions are aimed at easing the financial burden of parents who are required to meet the educational and medical expenses of their children. In addition, the Income Tax Act also recognizes the income of children and provides certain exemptions to it as well. By availing of these exemptions, parents can not only reduce their tax liability but also ensure the well-being and education of their children. In this way, the Income Tax Act provides a helping hand to parents who are striving to provide the best for their children.
As per the Income Tax act/Rules, there are several exemptions available to individuals related to child/children. These exemptions are designed to provide financial relief to parents or guardians of children, as the cost of raising a child can be quite high. In this blog post, we will discuss the different exemptions related to child/children and their eligibility criteria.
1. Exemption for tuition fees
Exemption/Deduction for tuition fees is a tax benefit provided to individuals to help reduce the burden of education expenses. This exemption is available to parents or legal guardians who pay tuition fees for their children's education.
Under Section 80C of the Income Tax Act, 1961, an individual can claim a deduction of up to Rs. 1.5 lakhs on tuition fees paid for their children's education. This deduction is available for tuition fees paid to any school, college, university, or educational institution situated in India.
It is important to note that the exemption is available only for tuition fees paid, and does not include any payments made toward development fees, donations, or any other similar expenses. Additionally, the deduction can only be claimed for full-time courses pursued by the child, and not for any part-time or correspondence courses.
To claim the exemption, the parent or guardian must provide proof of payment of tuition fees, such as a receipt or fee challan. The deduction can be claimed in the year in which the fees are paid, and cannot be carried forward to subsequent years.
It is also important to note that this exemption is part of the overall limit of Rs. 1.5 lakhs under Section 80C, which includes other investments and expenses such as life insurance premiums, Provident Fund contributions, and repayment of home loans.
In conclusion, the exemption for tuition fees is a useful tax benefit that can help parents and guardians reduce their tax liability while supporting their children's education. By keeping in mind the eligibility criteria and rules for claiming the exemption, individuals can ensure that they make the most of this benefit while filing their income tax returns.
2. Exemption Due to Disability of Child
The Indian Income Tax Act provides various exemptions and deductions to individuals to reduce their tax liability. One such exemption is for medical expenses, which can be particularly beneficial for families with children who require medical care. Under this exemption, individuals can claim a deduction for medical expenses incurred on themselves, their spouse, children, and dependent parents.
If an individual has a child with a disability, they can claim an exemption for the medical expenses incurred for their treatment. This exemption can be claimed for any medical expenses incurred for the child's treatment, including hospitalization, medicines, and diagnostic tests. The exemption limit for this is up to Rs. 75,000 per annum, which can significantly reduce the individual's tax liability.
To claim this exemption, the individual must submit a certificate from a medical practitioner certifying the disability of the child. This certificate should contain details of the disability, its severity, and the treatment required for the child's condition. The individual should also maintain all bills and receipts related to the medical expenses incurred for the child's treatment, as they may be required to provide evidence of the expenses incurred.
In conclusion, the exemption for medical expenses related to a child's disability is a valuable provision in the Indian Income Tax Act. It provides much-needed relief to families with children who require medical care and can significantly reduce their tax liability. It is important for individuals to understand the eligibility criteria and the documentation required to claim this exemption to ensure that they can avail of the benefits provided under the Act.
3. Exemption on Minor Income
Under the Income Tax Act, the income of a minor child is taxed in the hands of the parent who earns a higher income. However, if a child earns income from any source like investments or as a professional, the income will be taxable in the child's hands. In such cases, the child can claim exemptions under certain conditions.
Income of minor [Section 10(32)]
Under section 64(1A) income of a minor child is clubbed along with the income of his/her parent, subject to certain conditions. If the income of an individual includes any income of his/her minor child, then such an individual can claim exemption (in respect of each minor child) of lower of the following amount:
- (a) Rs. 1,500 per minor child; or
- (b) Amount of income of each minor child (which is clubbed).
The exemption available for a child's income is up to Rs. 1,500 per child, per financial year. This exemption is available for a maximum of two children. This means that if you have two children, you can claim an exemption of Rs. 1,500 each for their income, which amounts to a total of Rs. 3,000. The child's income can be earned from any source such as interest on the savings bank account, fixed deposits, or other investments.
In order to avail of this exemption, the child must be below 18 years of age.
The benefit of this exemption is that it reduces the tax liability of the parent. If the child's income is taxable, it will be added to the parent's income and taxed at the parent's applicable tax slab. However, by claiming the exemption for the child's income, the parent can reduce their taxable income by up to Rs. 3,000 per financial year.
It is important to note that in order to claim the exemption, the parent must provide the details of the child's income while filing their income tax return. Also, if the child's income is earned from investments, the parent must declare the income from those investments while filing their income tax return.
In conclusion, the exemption for a child's income is a useful provision that can help reduce the tax liability of parents. It is important to take advantage of this provision and ensure that the necessary details are provided while filing income tax returns.
4. Exemption for hostel expenses
Exemption for hostel expenses is a tax benefit provided to individuals who pay hostel fees for their children. This exemption can be claimed by salaried individuals and is applicable only to children who are studying in a school, college, or university in India. Let's take a closer look at the rules governing this exemption.
Under Section 10(14)(i) of the Income Tax Act, an individual can claim an exemption of up to Rs. 300 per month, per child, for hostel expenses paid during the financial year. This exemption is available for a maximum of two children.
To claim this exemption, the employee must provide proof of the hostel fees paid, such as receipts, bills, or any other document issued by the educational institution. The exemption can be claimed by the employee by submitting Form 12BB to their employer.
It is important to note that the exemption is only applicable to the actual amount paid towards hostel fees. Any amount paid towards mess charges or other amenities is not eligible for exemption. Additionally, the exemption is not applicable to self-employed individuals.
In order to claim this exemption, the following conditions must be met:
- The child must be a dependent of the employee.
- The child must be studying in a school, college, or university in India.
- The hostel fees must have been paid by the employee.
- The employee must provide proof of the hostel fees paid.
In conclusion, the exemption for hostel expenses is a tax benefit provided to salaried individuals who pay hostel fees for their children. This exemption can help reduce the tax liability of the individual and should be claimed by submitting Form 12BB to the employer along with the necessary proof of payment.
5. Exemption for child's education allowance
Exemption for a child's education allowance is a tax benefit provided to salaried individuals by the Indian Income Tax Act, of 1961. This exemption allows individuals to claim a deduction for the expenses incurred on the education of their children.
As per Section 10(14) of the Income Tax Act, an employee can claim a deduction of up to Rs. 100 per month or Rs. 1,200 per annum for each child for the purpose of education. This exemption is applicable for a maximum of two children. Therefore, the maximum exemption limit for an individual is Rs. 2,400 per annum.
To claim this exemption, the individual must submit receipts or proof of expenses incurred on education, such as tuition fees, books, uniforms, etc. These expenses should be for education within India and must be incurred during the financial year for which the exemption is being claimed.
It is important to note that this exemption is only applicable to salaried individuals and not to self-employed individuals. Also, this exemption cannot be claimed in conjunction with any other exemption available under the Income Tax Act.
In case an individual receives an education allowance from their employer, it will be taxable as per the provisions of the Income Tax Act. However, the actual amount spent on education by the individual can be claimed as a deduction under the above-mentioned section of the Income Tax Act.
In conclusion, the exemption for a child's education allowance is a helpful tax benefit for salaried individuals who have children and incur expenses on their education. It not only provides relief from the tax burden but also encourages individuals to invest in the education of their children.
6. Deduction of Education loan for child education 80E
Section 80E of the Income Tax Act provides for a deduction on the interest paid on an education loan for higher education purposes. This deduction is available to an individual who has taken an education loan for themselves, their spouse, or their children. The loan must have been taken from a financial institution or approved charitable institution for pursuing higher education.
The deduction is available for a maximum of 8 years, starting from the year in which the individual starts repaying the loan or until the interest is fully paid off, whichever is earlier. There is no limit to the amount of interest that can be claimed as a deduction under Section 80E.
It's important to note that this deduction is only available for the interest paid on the education loan and not on the principal amount. Additionally, the loan must have been taken for pursuing higher education courses in fields like engineering, management, medicine, or any other course approved by the government.
To claim this deduction, the taxpayer must furnish a certificate of interest paid from the financial institution or the approved charitable institution where the loan was taken. This certificate must be kept as proof and should be produced when filing the income tax return.
The deduction under Section 80E is helpful for individuals who have taken an education loan for themselves, their spouse, or their children to pursue higher education courses. It can help reduce tax liability and encourage more individuals to take education loans to further their studies.
In conclusion, there are several deductions and exemptions available to parents in India under the Income Tax Act for expenses related to their child's education, healthcare, and overall well-being. These exemptions include tuition fees, medical expenses, education allowances, hostel expenses, and income earned by the child. Additionally, parents can also claim a deduction for interest paid on education loans taken for their child's higher education under Section 80E. It is essential to understand and make use of these exemptions and deductions as they can significantly reduce the tax burden for parents and allow them to invest more in their child's future. However, it is crucial to follow the guidelines and fulfill the necessary criteria to claim these deductions and exemptions.