Tuesday, Nov 29, 2022
Outlook Money

Deduction For School Fee Under Section 80C Allowed Only For Two Children

If spouse is taxpayer, claim for deduction can be made for third child as well. Deduction in respect of interest on home loan can be claimed only when construction is completed and possession is taken. No deduction available for interest earned on fixed deposits

I have two daughters and one son. Can I claim deduction for school fee paid for all three children under Section 80C of the Income-tax Act, 1961? 

Answer: According to provisions of Section 80C, an individual can claim deduction in respect of tuition fee paid for education of two children, up to Rs. 1.5 lakh in a year along with other eligible items.  Since the law clearly provides that the deduction under Section 80C for tuition fee can be claimed only in respect of two children, you cannot claim the deduction for tuition fee of all three children, but only two of your children.  However, in case your wife is also a taxpayer, she can claim the deduction in respect of tuition fee paid for the third child. Even if the tuition fee paid for two children exceeds the threshold limit of Rs. 1.50 lakh, the excess can be claimed by the spouse for those who have only two children.

I have booked an under-construction flat and taken a loan for the same. I am paying pre-equated monthly instalment (EMI) interest on the amount disbursed. Can I claim tax rebate on the home loan interest for the under-construction house? 

Answer: The deduction in respect of interest paid on money borrowed for a house under Section 24(b) of the Income-tax Act, 1961, is available from the year in which the construction is completed and possession is taken. Therefore, you will not be able to claim any deduction in respect of interest till the construction is completed and possession is taken. However, you can claim one-fifth of the aggregate of pre-EMI interest paid till the year prior to completion, in five equal instalments beginning from the year of completion of construction along with the regular interest for the year. That said, do note that the aggregate of interest for the year and one-fifth of the pre-EMI interest cannot exceed Rs. 2 lakh if the house is self-occupied. In case the house is let out, there is no restriction on the amount up to which the claim can be made under Section 24(b). Also, the loss under the house property head can only be set off up to Rs 2 lakh against other income during the same year, and the unabsorbed loss can be carried forward for set-off against house property income for the next eight years.

Question: I am a salaried person. Do I need to include interest earned from saving bank account and fixed deposits while calculating my tax obligations?  

Answer: While filing your income tax return (ITR), you need to include all the taxable income in your tax return, in addition to your regular salary. Interest on saving bank account and fixed deposits is fully taxable, and so, you will have to include all the interest received by you, and pay advance tax if the net tax liability after tax deducted at source (TDS) exceeds Rs. 10,000. However, you can claim deduction upto Rs. 10,000 in respect of interest from saving bank account, but there is no deduction available for interest earned on fixed deposit. 

The author is a tax and investment expert

(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)