The limits on child education and hostel allowances have been drastically enhanced, providing more tax benefits to the salaried class. But the catch here is that this will be possible only under the old regime of taxation.
As per the figures published by News18, this is a considerable enhancement from the earlier limits, which means an eligible person can save around ₹2.88 lakh per year from his taxable income.
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Revised limits bring higher tax relief
Under the updated structure, the child education allowance has been raised from ₹100 to ₹3,000 per month per child, while the hostel allowance has increased from ₹300 to ₹9,000 per month per child.
These benefits apply to a maximum of two children. On an annual basis, this translates to ₹72,000 under education allowance and ₹2,16,000 under hostel allowance, taking the total exemption to ₹2,88,000.
Who can claim the exemption
The revised exemptions are available only to salaried individuals, and only if these components are included in their salary structure.
Employees must ensure that child education allowance and hostel allowance are part of their cost-to-company (CTC). Without these components, the exemption cannot be claimed.
The increased limits are applicable exclusively under the old tax regime. Taxpayers who have opted for the new regime will not be eligible to claim these exemptions.
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This distinction is likely to influence tax planning decisions, particularly for salaried parents weighing the benefits of exemptions against lower tax rates.
In the highest income slab, this tax benefit works out to nearly ₹83,520 in terms of money savings after taking into consideration the cess and surcharge.
It is likely that this revision in the limit will help families who incur costs on education.
