How young children can help parents maximize their tax savings

financialexpress.com:

By Sudhir Kaushik

In the journey of parenthood, amidst the joys and responsibilities, there lies an often overlooked aspect: the significant tax benefits available to families with young children. Beyond the emotional rewards of nurturing and raising children, there are tangible financial incentives provided by the government to support families in meeting the various needs of their children, including education, healthcare, and other essential expenses. Understanding and optimizing these tax breaks can significantly alleviate the financial burden on families and enable them to secure a better future for their children.

Under Section 10(14) of the Income Tax Act, salaried taxpayers are entitled to certain allowances as part of their Cost to Company (CTC) structure to cover expenses related to their children’s education. These allowances include:

1. Children’s Education Allowance: A deduction of Rs 100 per month per child, up to a maximum of 2 children, totaling Rs 2,400 per annum.

2. Hostel Expenditure Allowance: A deduction of Rs 300 per month per child, up to a maximum of 2 children, totaling Rs 3,600 per annum.

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Additionally, tuition fees paid for children’s education are deductible under Section 80C of the Income Tax Act. Each parent can claim a deduction of up to Rs 1,50,000 per annum separately. This deduction covers tuition fees paid to schools, colleges, universities, or other educational institutes in India for up to two children. However, it’s important to note that this deduction is exclusive to tuition fees and does not encompass other fees, such as those for part-time or international courses.

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