Tax Benefits for Children

CA Umesh Sharma , Last updated: 15 November 2022  

Arjuna (Fictional Character): Krishna, Children's day was celebrated yesterday. While we celebrated this day and took care of children, what about the taxation benefits for parents on taking care of their children?

Krishna (Fictional Character): Arjuna, 14th Nov is celebrated as Children's Day on Hon Mr. Pandit Jawaharlal Nehru's birthday. Every parent spends money from their income on the education, development of their children, but are unaware of the taxation benefits which the parents can enjoy, let us discuss it one by one.

Arjuna (Fictional Character): Krishna, what are the benefits available to parents as deductions in Income Tax for expenses on their children?

Krishna (Fictional Character): Arjuna, Parents make a lot of expenditure on their child's education, there is a provision available under tax act which provides for-

Tax Benefits for Children
  1. Payment of tuition fees paid by parents for their children is allowed as deduction under section 80C. The Deduction is available to the extent of Rs 1,50,000/-.
  2. Exemption for salaried taxpayer if they get perquisite from their employer for education of Rs 100 per month per child (upto 2 children)
  3. Exemption for Hostel Allowance received by Salaried taxpayer of Rs 300 per month per child (upto 2 child)
  4. Interest on Education loan taken for higher studies can be claimed under Section 80E.

Arjuna (Fictional Character): Krishna, are there any special benefits for girl child?

Krishna (Fictional Character): Arjuna, Government had launched "Sukanya Samruddhi Scheme" for girl child, the scheme says that deposits can be made in the name of girl child by her parents. Deposits can be as low as Rs 250 per month to maximum of Rs 1,50,000 per year. Following are the benefits which parents can enjoy-

  1. Deposits made under the scheme are eligible for deduction under Section 80C of the Income Tax Act, 1961
  2. Interest earned from the deposits are exempt from tax.
  3. There will no tax on maturity or withdrawal of funds from the scheme.

Arjuna (Fictional Character): Krishna, what will happen if a child is minor and he earns income?


Krishna (Fictional Character): Arjuna, Income Tax provides that,

  1. If a minor has earned income, it will clubbed in the income of the child's parents whose income is higher. Also, such parent can claim exemption of Rs 1500 or income of minor whichever is less.
  2. However, if the minor child has earned income from manual work or any activity involving application of his/her skill, knowledge, talent, experience, etc, then the income shall not be clubbed in the income of his/her parents.

For Example- A Minor has earned Rs 10 Lakh as a winning prize in a singing competition, then that income shall be taxed in hands of that Minor and will not be clubbed in parent's income.

Arjuna (Fictional Character): Krishna, what lesson the taxpayer should take from this?

Krishna (Fictional Character): Arjuna, Any parent in the world always want their child to excel in any activity their child wants to go, and parents spend their earning in making their children's dream come true. Education is the right of every child but there are few who are lucky to get it and those who are lucky to have should take benefits of the deductions that are available with it.

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CA Umesh Sharma
Category Income Tax   Report

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