A Complete Guide on Children Education Allowance Exemption

Your primary concern as a parent, after the health of your children, is their education. Getting quality education for your child is what keeps you motivated to work harder each day. Since schooling and subsequent higher studies are becoming expensive with each passing year, merely saving money in a Savings Account may not meet the educational expenses you are bound to incur. Besides, the taxman’s axe on your income could further eat into your savings. What you need is a smart investment plan in this situation. This could enable you to fulfil the academic ambitions of your children while also saving taxes at the same time. Here are some tips to help you achieve both goals.

Save taxes on tuition fees

You can claim a deduction of up to Rs 1.5 Lakh under Section 80C of the Income Tax Act on your child's school or college fees, and reduce your taxable income. You can claim this deduction on the tuition fee of two children on an annual basis.

Invest in Sukanya Samriddhi Yojna for your young daughter

If you have a daughter who is below ten years of age, you can consider investing in the Sukanya Samriddhi Account. This is an investment scheme floated by the Government of India for the girl child. This investment plan keeps your money locked in until your daughter turns 18 years of age. You can begin with a small deposit of Rs 1,000 which is the minimum amount and set aside up to Rs 1.5 lakh annually in this scheme. Besides helping you plan out your daughter's further studies, investing in this plan will also fetch you a tax benefit up to the extent of Rs 1.5 lakh in a given year under Section 80C of the Income Tax Act. You can open a Sukanya Samriddhi Account for your daughter with HDFC Bank and reap these benefits.

Looking to apply for a Sukanya Samriddhi Account? Locate your nearest branch to open your account.

Invest in an ELSS dedicated to your child’s education

An ELSS or an Equity Linked Savings Scheme is the only Mutual Fund category that provides tax benefits under Section 80C of the Income Tax Act. You can get tax benefits of up to Rs 1.5 lakh annually by investing in this scheme. An ELSS is an efficient tax savings tool compared to other investment options. This is because it comes with a shorter lock-in period of three years, as compared to others that have a minimum lock-in of five years.

The most significant advantage of ELSS is that it offers the benefit of capital appreciation over the long term. You can consider investing in an ELSS with HDFC Bank with the long-term aim of funding your child’s education. Through a systematic investment plan, you meet your financial goals easily without a strain on your budget. Regular investment in an ELSS also provides tax benefits on your annual income, as mentioned earlier.

Have an investment strategy in place

Worrying about your child’s education is natural, but with a proper investment plan in place, you can be assured their knowledge will not be compromised on.

Many online calculators available can help you calculate the amount you need for future educational purposes. You can use these tools to arrive at an investment strategy that can help you invest adequately and save taxes efficiently. If you need additional assistance on charting out a well-defined investment plan, you could opt for professional financial advice. This can help you invest and save towards the educational pursuits of your children.

Calculate the returns on Tax saving fixed deposits with FD Calculator.

You can open tax saving fixed deposit and get deductions under section 80c of the Income Tax Act.

* The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice from before you take any/refrain from any action. Tax benefits are subject to changes in tax laws. Please contact your tax consultant for an exact calculation of your tax liabilities.