Income Tax Rules: Income tax exemption up to ₹2.88 lakh, know who will get the benefit? – informalnewz

The government recently amended the income tax rules regarding children’s education and hostel allowance fees. Parents can now avail of an income tax exemption of up to ₹2.88 lakh on their children’s allowance fees.

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Income Tax Rules: The government has provided significant relief to income tax payers. Under the Income Tax Rules, 2026, the government has significantly increased the tax-free allowance limit for children’s education and hostel expenses. Under the new rules, families with two children can now benefit from a tax exemption of up to ₹2.88 lakh annually. This means this exemption can be claimed for a maximum of two children. However, this exemption will not be available to everyone, as there are certain prerequisites.

How much did the government increase the limit?

Child Education Allowance: Previously, this was ₹100 per child per month. This has now been increased to ₹3,000 per month.

Child Hostel Allowance: Previously, this allowance was ₹300 per child per month. This has now been increased to ₹9,000 per month.

Who will benefit from this?

This exemption is only available to salaried employees and only if the amount is included in their salary structure (CTC).

If this allowance is not included in your salary slip, you cannot claim it yourself when filing your ITR. Your company/employer will have to include it in your salary structure.

Most importantly, this exemption is only available to those who opt for the old tax regime. Those under the new tax regime will not be able to avail of it.

How much will you save with two children?

If you have two children, the maximum annual exemption will be as follows:

Education allowance: 3,000 × 2 × 12 = ₹72,000

Hostel allowance: 9,000 × 2 × 12 = ₹2,16,000

Total tax exemption: ₹2,88,000 annually

If an employee falls in the 30% tax slab, a tax exemption of ₹2.88 lakh (excluding cess and surcharges) can save up to ₹83,520.

What should employees do to qualify for the exemption?

If your salary structure doesn’t include these allowances (Child Education Allowance and Child Hostel Allowance), request your HR department to include them in your CTC.

To avail the exemption, keep proof of school admission, fee receipts, and hostel accommodation documents with you.