Tax Benefits on Children's Education in India: Tuition Fees, Allowances and Exemptions (AY 2026-27)

School and college fees are one of the largest recurring expenses in an Indian household, and the Income Tax Act does offer relief on several parts of that spend. The problem is that the relief is scattered across seven separate provisions, each with its own cap, its own definition of what counts, and its own answer to whether it survives under the new tax regime. Most parents claim the tuition fee portion under Section 80C and leave the rest on the table. Here is the full map for AY 2026-27 (FY 2025-26).

Education Tax Benefits at a Glance

The pattern is clear: almost everything on this list is an old-regime benefit. That matters, because the default regime is now the new one, and you have to actively opt out to claim any of the first three rows.

Section 80C: Tuition Fees Paid for Your Children

This is the benefit most parents know about, and also the one most often over-claimed.

What qualifies:

• Only the tuition fee component of the school or college bill
• Full-time education only, at any university, college, school or other educational institution situated in India
• Any stage from playgroup and nursery up to postgraduate courses
• A maximum of two children per taxpayer

What does not qualify:

• Development fees, building fund, donations or capitation fees
• Transport, hostel, mess, library, sports and laboratory charges
• Part-time, distance or correspondence courses, and fees paid to a foreign institution
• Fees for yourself, your spouse, your siblings or your parents

The two-children limit applies per taxpayer, not per family. If you have four children, you can claim for two and your spouse can claim for the other two, as long as each of you actually paid the fees you are claiming. Adopted children and step-children count; nephews, nieces and grandchildren do not.

One more constraint that trips people up: the deduction works on a payment basis. A fee for the April 2026 term paid in March 2026 belongs to FY 2025-26 and is claimed in AY 2026-27, whatever academic year it covers.

Remember that tuition fees share the Rs 1.5 lakh ceiling with EPF, PPF, life insurance premium, ELSS, principal repayment on your home loan and everything else in the 80C basket. For a salaried parent whose EPF contribution alone is Rs 80,000, only Rs 70,000 of tuition fees actually reduces tax. Our complete Section 80C guide covers how to sequence these items so nothing is wasted.

Children Education Allowance and Hostel Allowance

These two are salary exemptions, not deductions, and they exist only if your employer actually pays them as a named component of your salary.

• Children education allowance: Rs 100 per month per child, for up to two children, so Rs 2,400 a year for two children
• Hostel expenditure allowance: Rs 300 per month per child, for up to two children, so Rs 7,200 a year for two children

Together that is a maximum of Rs 9,600 a year, an amount unrevised in decades, but it costs nothing to claim if the allowance already sits in your CTC. The exemption is capped at the lower of the allowance received and the statutory limit, so an employer paying Rs 500 a month per child still only gets you Rs 100 a month exempt. Both exemptions sit under Section 10(14) read with Rule 2BB, so they are withdrawn under the new regime. If your employer does not have these components and you are firmly in the old regime, a salary restructuring conversation with HR can add them at no cost to the company.

Free Education Provided by Your Employer

This one is genuinely underused, and unlike the rest of the list, it works under both regimes.

Where an employer runs or maintains an educational institution and provides free or concessional education to an employee's children, Rule 3(5) values that perquisite at nil if the cost of such education does not exceed Rs 1,000 per month per child. This is common with PSUs, defence establishments, railways, manufacturing townships and university employers. Perquisite valuation is not among the exemptions Section 115BAC withdraws, so the benefit survives the switch to the new regime. Note that if the cost per child exceeds Rs 1,000 a month, the entire value becomes taxable, not just the excess.

Scholarships Are Fully Exempt

Section 10(16) exempts any scholarship granted to meet the cost of education, with no monetary ceiling. It covers merit scholarships, need-based grants, government schemes such as the National Means-cum-Merit Scholarship, cash fee waivers and research fellowships, and it applies whether the payer is the government, a university, a private trust or a company CSR programme. Section 10(16) is also not withdrawn under the new regime, so a scholarship stays exempt whichever regime you choose. Where the money is a stipend rather than a scholarship, the distinction decides taxability, and we cover that boundary in our guide on stipend taxation for interns and research fellows.

Income in Your Minor Child's Name

If you have opened a fixed deposit, mutual fund folio or savings account in a minor child's name, the income from it is clubbed with the parent's income under Section 64(1A), specifically with the parent whose total income is higher.

Section 10(32) then allows a small exemption of Rs 1,500 per child per year, or the clubbed income if it is lower. So a minor's FD earning Rs 9,000 of interest adds Rs 7,500 to the parent's taxable income.

Two exceptions are worth knowing: income the child earns from their own manual work, skill or talent is taxed in the child's own hands, and so is the income of a child with a disability specified under Section 80U. Section 10(32) is unavailable under the new regime, so the full clubbed amount is taxable there. Sukanya Samriddhi Yojana sidesteps the problem entirely: it is exempt-exempt-exempt, currently earning 8.2% per annum with the rate reviewed quarterly, and neither the interest nor the maturity is taxable or clubbed.

Sending a Child Abroad: TCS on Foreign Remittances

Fee transfers under the Liberalised Remittance Scheme attract tax collected at source, and the rules changed favourably from 1 April 2025.

The threshold rose from Rs 7 lakh to Rs 10 lakh, and TCS on loan-funded education remittances was removed entirely. TCS is not a tax cost, only a cash flow cost: whatever the bank collects appears in your Form 26AS and is fully adjustable against your final liability or refundable. Salaried parents can also report it to their employer through Form 12BAA so that monthly TDS drops instead of waiting for a refund, which we explain in our Form 12BB and 12BAA guide.

Worked Example: Does Any of This Change Your Regime Choice?

Priya earns a gross salary of Rs 16,00,000 and has two children in school. She pays Rs 1,20,000 in tuition fees and Rs 25,000 in health insurance premium, her EPF contribution is Rs 72,000, and her employer pays both education and hostel allowance.

Old regime

New regime

The education benefits are real but small. Tuition fees add only Rs 78,000 of usable deduction once EPF has taken most of the 80C ceiling, worth Rs 24,336 at her 31.2% marginal rate, and the two allowances save another Rs 2,995. The new regime's wider slabs save her over Rs 1.17 lakh.

That is the honest conclusion for most parents: education deductions rarely flip the regime decision on their own. They tip the balance only alongside a large home loan interest claim, HRA and an 80E education loan, which is exactly the position of a parent with a child in college and a mortgage running. When you file with 49Tax, both regimes are computed side by side from your Form 16, so you see the rupee difference for your own numbers before committing to one.

Four Mistakes That Trigger Scrutiny

Claiming the full school bill under 80C. The annual receipt bundles tuition with transport, activity and development charges, and only the line labelled tuition fee qualifies, so ask the school for a break-up.

Both parents claiming the same child's fees. Each parent may claim only the fees they personally paid, for up to two children each. Claiming the same Rs 1,20,000 twice is a duplication the department can see when both returns are read together.

Claiming tuition fees for a foreign university. Section 80C requires the institution to be situated in India. Foreign education is served by Section 80E on education loan interest instead, which has no cap and no geographic restriction.

Forgetting the minor child's interest income. Interest on a minor's account appears in your AIS under your PAN once the account is linked to you as guardian, and leaving it out is a common cause of mismatch notices.

Key Takeaway

Work through it in this order. Check whether your employer pays children education and hostel allowance, because that is free money in the old regime. Then work out how much 80C headroom is left after EPF and home loan principal, since only that leftover portion of the tuition fee actually saves tax. Add any employer-run school facility and any scholarship, both of which you keep in either regime. Only then compare regimes, and expect the new one to win unless you also carry a home loan or a running education loan. Ask the school for a tuition-only fee certificate before filing season starts, and keep the minor child's interest income beside you when you reconcile against AIS.