Income Tax Deductions for expenses incurred on Children

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An Individual incurs various expenses for proper upbringing of their children. Some of these expenses can also be claimed as an expense under the income tax act and will help a taxpayer save his income tax.

The taxpayer would be required to disclose the deductions claimed for expenses on his children in his income tax return and net taxable income computed after reducing the deductions would be taxable as per the income tax slab rates.

The various tax benefits for expenses incurred on your children have been explained in this article.

Tax Benefits for expenses incurred on Children in India

  1. Income Tax Benefit for Tuition Fees

The fees paid by a person to any university, college, school or other educational institute in India is allowed to be claimed as a deduction under Section 80C. There are various other expenses as well which are allowed to be claimed as a deduction under Section 80C and the combined limit of deduction allowed under Section 80C is limited to Rs. 1,50,000.

This limit of deduction allowed under Section 80C was earlier Rs. 1,00,000 but has been increased to Rs. 1,50,000 w.e.f from Financial year 2014-15.

  1. Income Tax Benefit for Education Loan

In case a person has taken an Education Loan for the education of his children, an income tax deduction is allowed for the interest paid on such education loan under Section 80E.

This deduction is allowed over and above the Income Tax Deductions allowed under Section 80C of Rs. 1,50,000. Moreover, this deduction is allowed not only for education pursued in India but also for Education pursued outside India.

It is to be noted here that only the Interest portion is allowed to be claimed as a deduction and not the Principal portion. Moreover, this deduction is allowed only for Loans taken from any Financial Institution or any Charitable Institution and not for Loans taken from Friends or Relatives.

  1. Income Tax Benefit for Health Insurance of Children

In case a person has paid any amount as Health Insurance Premium for insuring the health of his children, this amount is allowed to be claimed as an Income Tax Deduction under Section 80D. This deduction allowed is over and above the tax deduction of Rs. 1,50,000 allowed under Section 80C.

However, the maximum income tax deduction allowed under this Section for payment of health insurance premium of their children is limited to Rs. 15,000

  1. Income Tax Deduction for Certain Specified Ailments

In case any expense is being incurred for Medical Treatment of a dependent person, an income tax deduction for the same is allowed for the person who has made the expenditure. These deductions are available under Section 80DD, Section 80DDB & Section 80U depending on the nature of expense.

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  1. Income Tax Exemption for Allowances received from Employer

In case your employer gives you certain allowances like Children Education Allowance, Hostel Allowance etc for the benefit of your children – income tax exemption is allowed from such allowances under Section 10 up to a certain specified limit.

Who can claim Deduction for such expenses on Children?

In case both the mother and father are earning, a question arises with respect to the fact that who can claim deduction for the above expenses incurred on children. Although people try to claim such benefits in the hands of the person who is in the higher tax slab as that would save more tax – it is not the correct way to be claiming deductions.

The deduction for expenses incurred on children shall be claimed by the person who has actually paid the expense.

A Personal Finance enthusiast, Karan is the founder of charteredclub.com and loves to discuss about Money related matters.