For tax purposes, the fee reduces the total gross income which in turn reduces the tax liability. Let us say you fall in the highest income bracket and you pay 30.9 per cent as tax, and you pay Rs 80,000 a year as schools fees. In this case, the tax saved will amount to Rs 24,720 in that year.
Here's how to get the maximum benefit out of tuition fees.
Are all institutions eligible?
What kind of education?
What is not covered?
Tax benefit for how many children?
The benefit applies for the fees paid for up to two children. So if a couple has four children, both can claim tax benefit as both have a separate limit of two children each.
Which parent gets the tax benefit?
The parent who makes the payment gets the tax advantage. If both parents are working and pay taxes, both can claim individually up to the amount of fees paid.
If both are working and want to take the benefit under Section 80C for the amount paid by them respectively, they can do so. So if the fee paid is Rs 2 lakh, of which the father has paid Rs 50,000, while the mother has paid Rs 1.5 lakh, both can claim the amount individually as per the payment made by them.
Conclusion :
Estimate the amount needed for higher studies and create a savings plan towards that goal, preferably through SIPs in 3-5 equity diversified mutual funds scheme. To ensure that the goal is met, do buy adequate life cover, preferably through a pure term insurance plan.
Source:-The Economic Times
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