Children Education Allowance

Table of Content

1. What is the Children Education Allowance?

2. Is CEA Available for Private Sector Employees?

3. What are the Eligibility Criteria for children education allowance (CEA)?

4. What Are the Eligibility Requirements for Schools or Institutions to Offer CEA?

5. Which Types of Fees Can Be Reimbursed Under CEA?

6. How is the Reimbursement Claimed?

7. Children Education Allowance Limits and Tax Rules

8. Who is Eligible to Apply for Exemptions Under Section 80C?

9. How to Claim Tax Exemptions for Children Education Allowance?

10.What Are some Guidelines on Child Education-Related Allowances or Plans?

11. Examples of Child Plans - HDFC Life Click 2 Achieve

12. Frequently Asked Questions

What is the Children Education Allowance?

Children Education Allowance (CEA) is a monthly financial benefit provided to Central Government employees to help with their children’s school education costs. It can be used for expenses like school fees, books, uniforms, and hostel stays.

Under the 2024 revised order, the CEA reimbursement amount has been increased to ₹2812.5 per month^^ and the hostel subsidy to ₹8437.5. 

The mentioned amount can be claimed for covering only the two eldest surviving children. In addition, the amount can be claimed in case the second child's birth results in twins or multiple births. 

For Divyang children, the reimbursement is double, i.e. ₹5625 per month. The rates are fixed and remain the same regardless of the actual amount spent^@.

Is CEA Available for Private Sector Employees?

This reimbursement scheme is generally for Central Government employees under DoPT guidelines, defense personnel and PSU employees. However, even a lot of private sector companies offer this allowance to their employees.

Tax exemption rules under Section 10(14) of the Income Tax Act, 1961 and Rule 2BB -This exemption applies only to the extent of the following - 

• ₹100 per month per child for education up to a maximum of 2 children. This amount is tax-free. 

• For hostel expenditure, the amount is ₹300 per month per child. 

 If you work in the private sector, you can still plan for your child’s education using other tax benefit alternatives such as:

•  Tuition fees up to two children for full-time education limited by the overall cap of ₹1.5 lakhs per financial year under Section 80C of the Income Tax Act, 1961  

• Child ULIPs (Unit Linked Insurance Plans) are covered under Section 80C for deduction of premium paid; also the maturity proceeds are exempt under Section 10(10D) of the Income Tax Act, 1961 subject to conditions prescribed .

• Sukanya Samriddhi Yojana (for girl children), the deposit amount qualifies for the deduction under Section 80C; also the interest earned and maturity proceeds are fully exempt under Section 10(11A) of the Income Tax Act, 1961.

• Education savings plans from banks or insurance companies qualify under Section 80C i.e. 5-year bank/post office deposits under Section 80C (2)(xxi) of the Income Tax Act, 1961 including insurance-linked policies/ULIPs.

• The aggregate tax deduction amount under sections 80C^# is Rs. 1.5 Lakh per taxpayer for all the above investments put together.

What are the Eligibility Criteria for children education allowance (CEA)?

To be eligible for the children education allowance (CEA) for Central Government employees, these are the criteria that children have to fulfil:

• No minimum age for CEA reimbursement; even nursery class children are eligible.

• From February 2012, no minimum age restriction rule applied to Divyang children. 

• The maximum age limit of a normal child is 20 years.  

• For Divyang children, the maximum age limit is 22 years, and for them, double the normal CEA rate is applicable. 

• Children must be students of government-affiliated boards, junior colleges and universities.

• CEA is applied from nursery up to class 12 and the initial 2 years of a certificate or diploma course.

• Children who are studying through correspondence or distance learning are eligible. 

What Are the Eligibility Requirements for Schools or Institutions to Offer CEA?

Not all schools or academic institutions are eligible for the CEA reimbursement scheme. Here are the eligibility criteria for schools or institutions: 

• Early childhood education institutions have to qualify for the Children’s Education Allowance programme through compliance, ensuring standards and legitimacy. 

• The school or educational institution has to be recognised by the central/state government, such as CBSE, ICSE and state boards, AICTE-affiliated diploma colleges, union territory or other authorized educational bodies. 

• Schools that are located in regions governed by an accredited educational organization.

• For Divyang children, an education institution approved or aided by the government or UT administration is eligible. These institutions might not be formally recognised.  

Which Types of Fees Can Be Reimbursed Under CEA?

Children Education Allowance (CEA) helps Central Government employees cover various educational expenses for their children. The reimbursable costs are grouped into two main categories:

Please Note:

• The maximum reimbursement limit is ₹2,812.50 per month per child (hostel subsidy is separate i.e ₹8437.5/- per month fixed) irrespective of actual expenses incurred by Government employees.

• Expenses are eligible only for the two eldest surviving children.

• For a full list of reimbursable items, refer to the latest DoPT Office Memorandum (OM).

Academic Expenses

• Tuition Fee

This refers to the academic instruction fees in schools or any other academic institution. This fee primarily covers educational expenses.   

• Admission Fee

At the time of enrolling a child for an academic course or a session, CEA covers the admission fee. It is a one-time payment that helps a child reserve their seat in an institution. CEA reimbursement covers new enrolment as well as school transfers.

• Laboratory Fee

Child Education Allowance provides fees for using the science or computer laboratory facilities in academic institutions, mostly in secondary and higher secondary classes.

• Special Fee

To cover subject-specific charges, such as music classes, horticulture, electronics and maintenance of a computer or science laboratory. 

• Library Fee

This fee is applicable to allow book borrowing privileges or digital learning resources.  

• Textbooks and Notebooks

Children education allowance covers one set of textbooks and notebooks for a session. 

Other Educational Costs

• Games/Sports Fee

Children education allowance covers costs for children participating in physical education classes, sports and games taking place within the school premises.

• Cost of Extracurricular Activities

CEA covers when schools organize extra-curricular activities such as music, dance lessons, and painting. Billing for these activities is separate. 

• School Uniforms

CEA allows parents to reimburse for purchasing school uniforms and their seasonal variations, such as blazers, sweaters and jackets. 

• Shoes

The amount for one pair of shoes is reimbursable under the children education allowance if it is part of the school uniform. 

• Charges for Using Aids or Appliances

For Divyang children, if their academic institutions recommend Braille kits, hearing aids and other learning aids, then CEA reimburses for those items too. 

Please note: Refer to DOPT OM for the full list of reimbursable expenses.

How is the Reimbursement Claimed?

To claim reimbursement under the child education allowance, the government employees have to submit a certificate issued by the head of the education institution clarifying for which year or period the claim has been made. It is also crucial to confirm that the child has studied in that institution in the previous academic year. 

In case the certificate of intimation is unavailable, attaching a self-attested copy of the fee receipts is necessary. These should contain details about the deposited fees. Furthermore, report cards can be utilised as supporting documents too. 

Children Education Allowance Limits and Tax Rules

The 7th Central Pay Commission (7CPS) and Children Education Allowance Rules: 

According to the 7th Pay Commission benefits, a salaried individual can claim CEA as part of their salary structure. As per the rule, CEA provides ₹2812.5 for education and ₹8,437.5 for hostel subsidy per child per month. This amount is completely under the children education allowance exemption. 

Tax rules under Section 80C of the Income Tax Act, 1961

Under Section 80C^# of the Income Tax Act, 1961, all individuals (government & private) paying any fees towards their children’s education can claim tax deductions. The rules for this claim are as follows:

• The tax deduction can be claimed for tuition fees paid   (deduction can be claimed maximum up to 2 children).

• Parents can file for tax returns for tuition fees paid for adopted children as well.

• The maximum limit of tax claim is up to ₹1.5 Lakh for each financial year. 

• The deduction on fees is only applicable to the actual payment. For example, if a parent is paying for a quarter ending in March 2025, in the month of April 2025, then the amount is eligible for tax deductions in the financial year 2025-2026. 

• The tax deductions are not applicable for part-time courses. 

• Section 80C^# benefits apply to fees paid for play schools, nurseries, and creches also. 

Please note: The aggregate tax deduction amount under sections 80C^#, 80CCD^#, and 80CCD^# is ₹1.5 Lakh per taxpayer.   

Please note: Actual reimbursement of CEA may be higher than the tax-exempt portion. In January 2024, the CEA amount increased by 25% when the Dearness Allowance (DA) crossed 50%. 

Who is Eligible to Apply for Exemptions Under Section 80C?

To avail the full income tax advantages associated with Children Education Allowance, you should check the eligibility requirements. The criteria are simple and easy to meet for all salaried government employees. Let's explore them in detail below:

• Scope of Eligibility

Biological parents are the only ones who can apply for tax exemptions. However, in absence of parents, the sponsors of child and legal guardians can apply for the same.

• Maximum Benefits Allowed

In case of both the spouses are government employees, only one of them can avail reimbursement under Children Education Allowance and Hostel Subsidy.

Maximum amount of deduction up to Rs. 1.5 Lakh are eligible for deductions from their taxable income. Deductions under Sections 80C, 80CCC, and 80CCD^# are included under this section. Qualifying Level of Education

Children with a level of education of up to class 12 are qualified for CEA benefits. In cases where the educational establishment has a close relationship with overseas institutes of higher learning, parents can get allowances for equivalent classes.

• Full-Time Courses

Tax exemptions under Section 80C^# are applicable only for full-time educational courses. If your child is enrolled in any part-time course, you will not be eligible to claim tax benefits.

• Single Parent and Adoption

A single parent is also eligible to claim for tax deductions under Section 80C^#. However, if any couple chooses to adopt a child, they can also apply for these tax benefits.

How to Claim Tax Exemptions for Children Education Allowance?

Claiming tax exemptions is a simple and hassle-free procedure. Here are the detailed steps to follow for easily claiming tax exemptions for Children Education Allowance (CEA):

• How to Claim Education Allowance Tax Benefits

Opt for a certificate attested by the head of the academic institution where you have enrolled your child. This certificate thereby confirms the educational status of your child and proves the child is valid to continue education in that institution. If you cannot get such a certificate, you have to submit a self-attested copy of the report card and original fee receipts for the relevant academic year.

• How to Claim Hostel Charges Allowance

Avail a duly attested certificate from the head of the institution mentioning the total costs allocated for food and boarding at the hostel. This certificate is a valid proof of the enrolled child in using the hostel accommodation. If you cannot get this certificate, you need to submit a self-attested copy of the report card and original fee receipts/e-receipts showing boarding and lodging expenses.

Integrated Approach to Education Planning

For optimal education funding security, consider combining:

1. Children Education Allowance (for eligible government employees)

2. ULIPs for long-term education corpus building

3. Term Insurance for contingency planning.

4. Traditional savings and investments

7th Pay Commission and Education Allowances

For the government employees who qualify for the 7^th Pay Commission benefits, the table below displays the rise in monthly Children Education Allowance over the period.

• Before 7CPC recommendations

Let’s look into the subsidy components before 7CPC recommendations:

• After 7CPC recommendations

Let’s look into the subsidy components in detail after 7CPC recommendations:

It is expected that the Central Government will keep modifying the existing laws governing the CEA upon changes in DA (dearness allowance). However, there are no specific deadlines for such revisions.

What Are some Guidelines on Child Education-Related Allowances or Plans?

It is important to understand that Children Education Allowance (CEA) is a Central Government reimbursement.

IRDAI’s Role

IRDAI oversees insurance-based education plans designed to help parents financially prepare for their children’s school or higher education expenses. These include products like:

• Child ULIPs (Unit Linked Insurance Plans)

• Savings insurance policies

• Education riders attached to life insurance plans

Examples of Child Plans - HDFC Life Click 2 Achieve

HDFC Life Click 2 Achieve^@ is a non-linked, non-participating, individual savings life insurance plan that provides guaranteed immediate income. So, for parents who are not eligible for children education allowance exemption, this is a great choice. 

Here are some of its features:

• The plan is customizable, enabling parents to choose periodic income, lump sum, or money-back features. 

• Offers a life insurance cover.

• Guaranteed¹ returns remain consistent throughout the income period.

• Built-in premium waiver feature helps to continue policy benefits even when the premiums discontinue in case the policyholder dies, gets diagnosed with a critical illness or experiences permanent disability. 

These insurance plans often provide features such as:

• Buit-in premium waiver in case of occurrences like death, critical illness, and total permanent disability on death of the policyholder.

• Tax benefits under Sections 80C and Section 10(10D) of the Income Tax Act, 1961

• Life insurance cover for the parent, ensuring financial protection

Important Note:

These child education plans are complementary financial tools and do not replace the government’s CEA reimbursement scheme. Both can work together to support your child’s education financially.

Note: If assessee has opted for Old tax regime, assessee shall be eligible to claim deduction under chapter VI-A (like Section 80C, 80D, 80CCC, etc). If assessee opted for New tax regime only few deductions under Chapter VI-A such as 80JJAA, 80CCD(2), 80CCH(2) are available.

Frequently Asked Questions

1. What is the amount of the Children Education Allowance?

Central Government employees in India receive a fixed Children Education Allowance of Rs. 2,812 per month for each child. this limit is applicable for up to two children. 

2. What is the new CEA rate for 2024?

The new CEA rate as applicable from January 2024 is Rs. 2,812 per month with a hostel subsidy of Rs. 8,437.5 per month. This payment is fixed irrespective of actual expenses incurred by Government Employee. 

3. Does CEA increase with age?

No, the Children Education Allowance doesn’t increase with age. However, the government has revised it in 2024 where the DA pay structure has increased by 50%, subsequently allowing CEA allowance and Hostel subsidy to increase by 25% each respectively.

4. How to claim child education allowance?

While filing our Income tax return, we can claim an education allowance, by possessing necessary documents ready, including receipts of school fees receipts, report cards and other details of admission Government employees are eligible to claim the allowance as per the rules and regulations. 

5. How to calculate a child education allowance?

To calculate the child education allowances, checking the rules as per the employer is mandatory. Usually, these allowances cover educational-related expenses and tuition fees up to a certain limit for each child. However, the applicable limit is up to two children.

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