Children Education Allowance Exemption & Rules | H&R Block
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Children Education Allowance Exemption & Rules

Education facility provided by the employer to an employee is treated as perquisite. Following are some key considerations from the point of view taxation.

  1. Amount spent by the employer for providing free education facility & training of employee is not taxable.
  2. Fixed education allowance received from the employer is exempted from tax to the extent of Rs. 100 per month for a maximum of 2 children.
  3. Allowances paid for hostel is exempt to the extent of Rs. 300 per month for maximum 2 children.
  4. School fee paid directly by the employer for employee’s family member is fully taxable.
  5. Reimbursement of expenses paid for the education of employee’s family member is taxable as perquisite.
  6. Education facility provided by the institution owned and maintained by the employer to employee and his family members will be taxable under the following conditions:
    1. Education provided to employees’ children:
      1. Educational expenses up to Rs. 1000 per month – per child is exempt from tax.
      2. If the value exceeds Rs. 1000 per month – per child then chargeable tax amount will be calculated as follows:
        • Cost to employer minus 1,000 and minus any amount paid/received from the employee.
    2. Education facility provided to family members other than children will be taxable on the basis of the cost of education in the same institution or in an institution in the nearby locality. If any amount is paid by the employee, then this amount is deducted from the cost of education in the same institution or in an institution in the nearby locality, the difference amount is taxable.
  7. Scholarships are tax-free when the amount paid is received in a bank account maintained specifically for the purpose of a scholarship scheme. Scholarships paid by the employer are not taxable as perquisite.

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Chetan Chandak (B.Com, LLB)
Chetan Chandak (B.Com, LLB)
Chetan is the Head of Tax Research at H&R Block (India) with an experience of more than a decade in tax advising. He is also a regular contributor for some of the leading news publications in India such as Economic Times, Financial Express and Money Control. Professionally, Chetan is fascinated by international taxation and expat-related tax research.