Tax Credit for College Students Living at Home

If parents are sending their child to college has an inbuilt tax advantage for the parents as the tuition fee qualifies for tax benefit under Section 80C. At that time parents are able to claim tax benefit on the college or tuition fee under Section 80C of the Income Tax (I-T) Act 1961. 

With the help of the tax credit facility for the college students can able to claim the deduction. Under the described section for tuition or college fee paid for two children. On the other hand this section is not claim made if an individual has paid tuition fees for his/her own studies or for spouses. The fees paid of tuition is paid at the time of admission or anytime during the financial year to any registered university, college, or educational institution based in India is eligible for tax benefit.

The tax credit for the college students who are living at home are avail on the full -time college education. It is must raising question in everyone mind that which expenses are not covered in the tax credit? There are several payments that are other than the tuition fees like donation or development fee or capitation fee made to an educational institution is not eligible for tax deduction. Then penalty levied on the tuition fee due to late payment is also not eligible for deduction.

However the fee that is paid towards the education of two children is applicable for deduction. However, if a couple has four children, both can claim tax benefit as both have a separate limit of two children each.

What are the not allowable expenses?

We all know that the education costs are spiralling. Therefore the fee for a masters or diploma in management from premier institutes can be about 20 lakh, on the other hand many private medical institutes charge about 40 lakh for an MBBS degree. There are other expenses. Taking an tax credit helps fund the course. The main advantage is that if the parent doesn’t have money, the loan can be repaid after the child completes the course and gets a job. In this process, the interest payment can be claimed as tax deduction. There are several expenses that are not allowable in the tax credit. Below mentioned are some of them.

● It includes the expenses that are related to any course of instruction or education involving sports, games or hobbies, or any noncredit course 

● The activity fees of students 

● The athletic fees of students

● Costs of room and board

● The Insurance premiums or medical expenses (It also includes student health fees)

● Transportation expenses 

● Other personal, living, or family expenses.

What is criteria for the tax credit for college students?

In the whole process of the tax benefits that is available under Section 80C is Rs 1.5 lakh. At that time you can calculate how much you have paid on the tuition fees and then you can decide how to go forward with other tax saving options. It is very beneficial because it helps to save tax on the education expense of your child. Because nowadays the cost of education is going up, it is advisable that parents must go for a long-term saving plan for their children's higher education in the future.

Why tax credits are considered as the lifesavers for colleges students?

In the process of the tax credit the deductions lower your taxable income and are called the student loan interest deduction and the Tuition and Fees Deduction. Two other savings are tax credits, which reduce the amount of taxes paid. 

What do you mean by term deduction for interest on education loan?

In the procedure of the deduction for interest on the education loan a student is eligible to claim a deduction for interest payments on education loan taken for pursuing his higher education or the higher education of a specified relative. For the purpose of higher education, it means any course of study pursued after passing the Senior Secondary Examination or its equivalent, from any school, board or university recognized by the Central Government or State Government or we can say from the local authority or by any other authority authorized by the Central Government or State Government or local authority to do so. It available under Section 80E of the ITA for a period of 08 years, including the year

Conclusion

In the end we will tell that a person should able to take cognizance of the various tax deductions/ exemptions available under the ITA while computing his tax liability during the financial year. Because we all know that the steep rise in education costs over the years, representations have been made with the appropriate authorities to revise the existing exemption limits. Therefore for children education/ hostel allowance since these limits were set way back in the year 1997.

A taxpayer, spouse or dependent can take the deduction as long as the person is legally responsible for repaying the loan and cannot be claimed as an exemption on another’s tax return. Until the loan is paid off, all interest paid during the tax year can be deducted up to the statutory limit. The deduction can be claimed even if the taxpayer does not itemize deductions.

Author: www.bthawk.com