• Notification Date: 20-01-2022
  • Notification No: N/A

Income Tax Relief for saving Kid’s Education in Budget 2022

The standard deduction for the salaried taxpayers was reintroduced from FY2018-19 onwards after being abolished in the financial year 2005-06. The limit of deduction was Rs.40,000, along with a tax exemption allowance of Rs.19,200 and medical reimbursement of Rs.15,000. The deduction limit has been increased to Rs.50,000 from FY2019-20.

But the amount is still quite low compared to the inflation and the living expenditure of the individuals over the years. Household expenditures, like internet, electricity, furniture costs have also significantly increased after the Covuid-19 pandemic. Hence, the deduction level needs to be increased further to Rs.75,000 at a minimum to provide a financial cushion.

Countries like the UK, US, Canada, and Ireland have introduced tax breaks to leverage medical and work-from-home expenditures. Introducing a similar scheme in India, along with the enhancement of the deduction limit would offer financial flexibility.

The taxpayers who have been opting for the concessional optimal regime under Section 115BAC of the Income Tax Act, 1961, can be offered the benefit of the standard deduction.

Saving a lump-sum amount for the education of children is an important budget goal. But there is no such deduction or exemption in the budget for kids’ education in India, except the Sukanya Samriddhi Yojana which is for the education of girl children. But there are no tax benefits as the deduction limitation for this scheme is merged under Section 80C limit of Rs.1.5 lakh in a year.

A separate exemption of Rs.1.5 lakh is required for this purpose. The amount is required to be directly transferred to the educational institution as the child opts for higher education to prevent any misuse of funds. The deduction for education expenses is required to be canceled from section 80C deduction and a completely separate deduction is needed to be formed.