Can parents claim their college student for tax exemption?

Last Updated at: March 11, 2020
343
income tax - Should parents claim college student on taxes_

This post is written by Sanjay Muthukumar

Introduction:

Obviously, the parents can claim a tax deduction for the expenses made on the education of their children under the income tax act, 1961. The government has announced various tax saving schemes for the assessee with respect to the spouse, children, parents, etc when certain conditions are met. Especially the section 80E of the Income Tax act, 1961 laid down the tax benefits for a loan taken in the name of children for higher education.

These days, most of the youngsters will prefer to do higher education in India or foreign countries. For instance, abroad,  pursuing a Masters in any stream will cost around 30 to 40 lakhs so they preferably opt for an education loan from any premier institute. Because funding through a loan seems like a wise thing to do as students can pay back the loan once they are employed. And the education loan can be availed for higher studies covering both India and outside India. Here the eligible higher education includes all the streams after completing the senior secondary level or any equivalent one.

File your child’s ITR now

Benefits under Section 80 E :

Let’s understand the tax benefits of the expenditure made on education. Section 80E of the income tax act, 1961, allows certain tax breaks for a loan taken for an education loan with certain fulfilments. The taxpayer is permitted to claim the total interest paid for the loan in the financial year. And there is no tax benefit will be availed for the repayment of the principal loan amount. Under section 80E, there is not any monetary upper limit for the deduction on interest on an education loan. The only limitation is that the deduction can be claimed for up to 8 years from the date of loan sanctioned and is only allowed for interest paid on education loan. Similarly, it is important to remember that the tax benefit can be claimed only if the loans were obtained from any bank or financial institution or any approved institution.

The loans raised from the family relatives or friends are not eligible to avail of tax deduction under the income tax act. So if anyone has an idea for obtaining the loan from the friends, be aware that you cannot enjoy any tax benefits.

While considering the Hindu Undivided Family (HUF), the member, who took the education loan, cannot avail the tax benefit stated under section 80E. Only the individual is allowed to take a loan for the education of himself, spouse, children. The legal guardian of the children is also allowed for a TDS.    

Benefits under Section 80 C:

Like section 80E, the income tax act provided another tax benefit scheme under section 80 C. The parents can claim a tax benefit on the amount paid as tuition fees to a college, university, or any other educational institution. The deduction will be allowed to the parents who make the payment. For example, if the father had paid the college fees but the mother wants to claim the tax benefit is not permitted. Only the appropriate person, who had made payment is eligible to claim in their ITR. The adopted child education fee is also allowed to be claimed from this scheme. 

Here the individual can be both the parents and guardian. But this provision is allowed only for two children i.e the maximum of two children can be claimed under one parent, therefore, the total of four children can be claimed by the parents (two by father, another two by mother) and it does not cover capitation fees, exam fees, development funds, etc. Under section 80C, each parent can be benefited up to 1.5 lakhs per financial year. Most importantly, the fees paid to the college or university should be situated in India.

 

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Can parents claim their college student for tax exemption?

343

This post is written by Sanjay Muthukumar

Introduction:

Obviously, the parents can claim a tax deduction for the expenses made on the education of their children under the income tax act, 1961. The government has announced various tax saving schemes for the assessee with respect to the spouse, children, parents, etc when certain conditions are met. Especially the section 80E of the Income Tax act, 1961 laid down the tax benefits for a loan taken in the name of children for higher education.

These days, most of the youngsters will prefer to do higher education in India or foreign countries. For instance, abroad,  pursuing a Masters in any stream will cost around 30 to 40 lakhs so they preferably opt for an education loan from any premier institute. Because funding through a loan seems like a wise thing to do as students can pay back the loan once they are employed. And the education loan can be availed for higher studies covering both India and outside India. Here the eligible higher education includes all the streams after completing the senior secondary level or any equivalent one.

File your child’s ITR now

Benefits under Section 80 E :

Let’s understand the tax benefits of the expenditure made on education. Section 80E of the income tax act, 1961, allows certain tax breaks for a loan taken for an education loan with certain fulfilments. The taxpayer is permitted to claim the total interest paid for the loan in the financial year. And there is no tax benefit will be availed for the repayment of the principal loan amount. Under section 80E, there is not any monetary upper limit for the deduction on interest on an education loan. The only limitation is that the deduction can be claimed for up to 8 years from the date of loan sanctioned and is only allowed for interest paid on education loan. Similarly, it is important to remember that the tax benefit can be claimed only if the loans were obtained from any bank or financial institution or any approved institution.

The loans raised from the family relatives or friends are not eligible to avail of tax deduction under the income tax act. So if anyone has an idea for obtaining the loan from the friends, be aware that you cannot enjoy any tax benefits.

While considering the Hindu Undivided Family (HUF), the member, who took the education loan, cannot avail the tax benefit stated under section 80E. Only the individual is allowed to take a loan for the education of himself, spouse, children. The legal guardian of the children is also allowed for a TDS.    

Benefits under Section 80 C:

Like section 80E, the income tax act provided another tax benefit scheme under section 80 C. The parents can claim a tax benefit on the amount paid as tuition fees to a college, university, or any other educational institution. The deduction will be allowed to the parents who make the payment. For example, if the father had paid the college fees but the mother wants to claim the tax benefit is not permitted. Only the appropriate person, who had made payment is eligible to claim in their ITR. The adopted child education fee is also allowed to be claimed from this scheme. 

Here the individual can be both the parents and guardian. But this provision is allowed only for two children i.e the maximum of two children can be claimed under one parent, therefore, the total of four children can be claimed by the parents (two by father, another two by mother) and it does not cover capitation fees, exam fees, development funds, etc. Under section 80C, each parent can be benefited up to 1.5 lakhs per financial year. Most importantly, the fees paid to the college or university should be situated in India.

 

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