According to the latest available information, India’s literacy rate is 77.7%. This data was made publicly available by the NSO in September 2020 on the occasion of World Literacy Day. To further advance the cause of literacy, especially among the backward states, India’s Income Tax department provides a number of tax breaks collectively known as Children Education Allowance or CEA.
Most children education allowance exemptions are categorised under Section 80C of the IT Act.
The 7th Pay Commission provides several major boosts to such allowances and tax breaks. That said, several states are yet to implement the 7CPC recommendations and follow older tax regimes.
Hence, child education allowance limits are slightly different across India’s states.
Also of note is the fact that for several salaried individuals, their children’s education fees, including tuition and hostel fees, plus allowances for purchasing recommended textbooks together form a separate component of their pay packages.
This section contains a gist of all provisions that govern the allowances.
Children education allowance covers 2 broad areas of expenses for the concerned employee – the costs incurred for schooling and education per se, and hostel charges. It has been pointed out by several leading experts on education policymaking that many Indian children are forced to leave school due to excessive hostel or similar accommodation charges.
To any individual gainfully employed in India, the following allowances are allowed –
Section 10(14) of the IT Act of 1961 covers the details of costs incurred.
Section 80C makes it amply clear which overheads will come under children education allowance section and which will not.
As of 2020, an individual can claim tax breaks on all sums paid as tuition fees deduction to schools, colleges, universities, and other educational institutions. Note that the exemption will be entertained only if these institutions are recognised by competent Central or State bodies.
No exemption will be entertained for payments of ‘development fees’, transportation costs, and any other amount which are not directly associated with educational purposes.
Furthermore, CEA is payable up to Standard 12 as of 2020. There have been a number of propositions from salaried individuals and education policy experts to extend this exemption to Graduate and Post-Graduate courses too.
However, there has been no word from the IT Department or the Central Government on these latter demands.
To take full advantage of dedicated children education allowance income tax benefits, all salaried individuals must take cognisance of the eligibility criteria. They are the following:
An example will make this point easier to comprehend. Since both parents can claim tax benefits under children education allowance of Rs. 1.5 Lakh each year, the total claim rises to 2 times this maximum deduction, i.e. Rs. 3 Lakh. However, tax relief will still remain at Rs. 1.5 Lakh only.
There has been considerable debate over the complexity of claiming these exemptions under Section 80C. Vouchers are a way of claiming reimbursements; however, there is no uniformity on which type of vouchers will be acceptable.
The simplest process is the following –
Note that all these details must also be reflected in Form 12BB before children education allowance is sought from the employer.
For those Government employees eligible for 7th Pay Commission benefits, the following tables reflect the increase in monthly children education allowance.
|Subsidy component||Allowance each month||Remarks|
|For education||Rs. 1,500||Subject to increase with DA rates|
|For hostels||Rs. 4,500||-do-|
After 7CPC recommendations
|Subsidy component||Allowance each month||Remarks|
|For education||Rs. 2,250||-do-|
|For hostels||Rs. 6,750||-do-|
While these increments are considerable, they apply to very few children in India.
There is speculation that the Central Government will revamp the existing laws governing the CEA. However, no timeline has been declared for the same.
Until these benefits trickle down to the poorest and most marginalised portions of our society, there is little hope that India’s literacy rate will improve quickly. As of now, the ball is squarely in the court of the Ministry of Education, known formerly as the HRD Ministry, and the Department of Higher Education.
The National Policy of Education or NPE is expected to deal with some thorny issues in this insular field.
Every child receives a CEA of Rs. 2,250 per month, as well as a hostel subsidy of Rs. 6,750 per month.
The child’s highest age restriction for claiming CEA is 20 years or until the time of passing 12th grade, whichever comes first. However, in the case of a divyang child, the maximum age is 22 years. There will be no age limit for claiming the CEA.
To claim CEA reimbursement, the government employee must present a certificate issued by the Head of the Institution for the period/year for which the claim is being made. The certificate should attest to the child’s attendance in school throughout the previous academic year.
There is no such permission. However, depending on the class of study, some banks pay a small fee ranging from Rs. 1,000 to Rs. 5,000 per child per year.
If your company provides you with a child education allowance, you may be qualified for a tax exemption under the Income-tax Act. The maximum amount exempted, however, is Rs. 100 per month or Rs. 1200 per year for up to two children.