Deduction under section 80C for tuition fees of children- tuition fees must be construed in wider sense.

[C.A. DEV KUMAR KOTHARI]

Chapter VIA – section 80C:

Section 80C provides for deduction from income of individuals and Hindu Undivided Families in respect of certain payments which are in nature of investments or expenditure. The section is basically intended to promote savings and also some useful expenditure which in long run create capital base.  One of item eligible for deduction is tuition fees. There are several conditions for the relief.

The relevant portion of the chapter and section reads as follows, with highlights added by author:

B.—Deductions in respect of certain payments

¹[Deduction in respect of life insurance premia, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures, etc.

80C. (1) In computing the total income of an assessee, being an individual or a Hindu undivided family, there shall be deducted, in accordance with and subject to the provisions of this section, the whole of the amount paid or deposited in the previous year, being the aggregate of the sums referred to in sub-section (2), as does not exceed one lakh rupees.

(2) The sums referred to in sub-section (1) shall be any sums paid or deposited in the previous year by the assessee—

(xvii) as tuition fees (excluding any payment towards any development fees or donation or payment of similar nature), whether at the time of admission or thereafter,—

(a) to any university, college, school or other educational institution situated within India;

(b) for the purpose of full-time education of any of the persons specified in sub-section (4);

Relevant part of subsection (4) is reproduced below:

(4) The persons referred to in sub-section (2) shall be the following, namely:—

(c) for the purposes of clause (xvii) of that sub-section, in the case of an individual, any two children of such individual.

Analysis:

Deduction for tuition fees u/s. 80C of the Income Tax Act 1961 is allowed to Individual Assessee  only and is not HUF. Individual can be man or woman. Deduction is eligible for tuition fees for full time course of child (minor or major natural or adopted)

Only children’s education is eligible:

Deduction under this section is available for tuition fees paid on maximum of two children’s education. Child can be major or minor. The Deduction is available for any two children to each assessee. Therefore, husband and wife both have a separate limit of two children each, so they can claim deduction for 2 children each. Both parents can pay fees for some of months and can claim deduction. For example suppose father paid fees for eight month of son S and mother paid for four months for S, and then both will be eligible to claim deduction in respect to the sum paid by them respectively. 

Deduction available on payment basis: -

Actual payment is criteria for deduction under this section.  Fees may be related to any period. For example feed paid for April 2011 if Paid in March 2011 will be eligible for deduction u/s. 80C in A.Y. 2011-12. Arrear of fees is not allowed as deduction even if liability is admitted.

Only full time course is eligible:- The deduction is available for Full Time courses only.  

Education in India is eligible:

University, college, school or other educational institution must be situated in India.

Allowability of pre-nursery, play school and nursery class fees: - Pre-nursery, play school and nursery class fees is also covered under section 80C.

Tuition fees:

Only tuition fees is eligible. Tuition fees has not be defined. However, what is not tuition fees is defined by way of exclusions. In the section itself we find the following wordings:

As tuition fees  (excluding any payment towards any development fees or donation or payment of similar nature)…

We find that the following items are specifically excluded:

any development fees or

donation or

payment of similar nature

The above items suggests that any payments of nature like development fees, donations or payment of similar nature are not eligible for deduction. On consideration of these items we can say that payments which are in nature of capital contributions for development by way development fees or donation or otherwise will not be included in tuition fees. These payments may be of recurring nature or casual nature.

In other words, expenses which are of revenue nature and which are in nature of tuition fees are eligible. In this regard we can refer to definitions of tuitions and tuition fees:

Tuition:- the activities of educating or instructing; activities that impart knowledge or skill;

Tuition fee - a fee paid for education and instructions to impart education to students.

Thus fees which are in nature of providing full time education and incidental instructions and training are part of tuition fees.

Other items of payments should be eligible:

What is not eligible is excluded; Therefore, any other payment which is in nature of fees for imparting education and training shall for part of tuition fees.

Items described under different heads which are in nature of tuition fees are eligible:

We find that schools charge various type of tuition fees for imparting education in different fields. For example, computer education including practical training on computers is now an essential for students pursuing education in any filed or stream. Science students are required to be educated in practical in laboratory, or workshops. Schools charge fees for computer education, lab fees etc. these payments shall therefore be part of tuition fees.  

Schools also charge session fees –this is not in nature of donation, development fees or payment of similar nature, therefore session fees is not a prohibited items of payment, This is tuition fees charged per session instead of per month.

Fees for games and sports:

Games and sports are very essential for proper education and development of children. Games and sports are necessary part of educations at least till school final. Games and sports enable children to acquaint themselves with many skills which are necessary for proper education and application of knowledge. Therefore, recurring fees for games and sports should be considered as a part of tuition fees. However, capital contributions by way of development fees, donation etc. for such activities will not be eligible.

Child:

Child can be natural child or adopted child of individual. It is not necessary that the marriage of parents should subsist.