~ Hum do and Hamare do ~

If you are an Indian, you must have heard this slogan at some point in your life. And, even if you are reading this for the first time, this is the slogan that Indian government used to encourage and control the population of our country.

India’s population standing at the 2nd largest population in the world. The family planning initiative which encouraged a couple to have two kids only. It was launched in 1952 to promote awareness towards family planning.

In other words, we can also say that Government intends you to have only two kids. But how this intention has favoured you in Income Tax when launched in 1961.

In Income Tax, you get exemption and deductions if you have two kids. Technically, these are known as “Children Education Allowance” or “Hostel Expenditure Allowance” or “Tuition Fees” etc.

But, agregately I call it as “Hum do and Hamare do benefit” under Income Tax Act.

Let’s have a quick review of these exemptions/ deductions –

1. Children Education Allowance – If you are receiving children education allowance from your employer then you are eligible to claim exemption upto Rs. 100 per month per child up to a maximum of 2 children. -Section 10(14)

2. Hostel Expenditure Allowance – If you are receiving Hostel Expenditure allowance from your employer then you are eligible to claim exemption upto Rs. 300 per month per child up to a maximum of 2 children. -Section 10(14)

3. Leave Travel Concession – LTC/ LTA exemption is allowed if it is given by an employer to an employee for going anywhere in India along with his family.

Family includes your spouse, children and dependent brother/ sister/ parents.

However, family doesn’t include more than 2 children of an individual.

4. Tuition Fees – Tuition Fees for any two children is allowed as per Section 80C

So, if you are planning to have third child, I am really sorry to say you can’t claim these exemptions/ deductions.

However, at this inflation rate, when the education system is so strong, school fees is much higher, books are costly do you really think that these exemptions are really worth it?

I mean, say Children Education Allowance, suppose you have only 2 kids, you are getting exemption of Rs. 200 per month for 2 children which comes to Rs. 2400/- annually and giving you total tax benefit of Rs. 720/- if an individual is liable for 30% slab rate.

Do you really need these type of exemptions in the name of tax benefit?

Those people who are liable for tax may be their income could be so much higher that Rs. 720/- tax benefit can’t make a difference in their life. Probably they could be spending approx. Rs. 3000/- monthly on just their petrol expense. or may be even doing parties on weekends and spending thousands of rupees in just one go.

I think its time for the government to be more practical towards these exemptions. We don’t need these time-worn exemptions.

What are your views on the same? It would be interesting to know what you think relating to these old-as-Adam exemptions?

Author Bio

Qualification: CA in Practice
Company: N/A
Location: Delhi, Delhi, India
Member Since: 26 Feb 2021 | Total Posts: 1
I am Shivangi Mittal. A Practicing "Chartered Accountant" by profession and "Passionately Curious" by heart and "People-Person" by nature. Passionately Curious comes from a quote of Einstein's actually; Once Einstein said, "I have no special talent. I am only passionately curious" My passion View Full Profile

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  1. KARTHIK R says:

    Nice article madam, you are correct.. Either it should be scrapped or it must be benchmarked to inflation as in the case of capital gains..

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April 2021