Pay less tax, stress less: Child care perks explained
What's the story
Did you know your workplace's on-site child care benefits could double as a tax-saving hack? With the rising cost of child care in India, many companies are stepping up to support working parents by providing these perks. But here's the kicker - the Income Tax Act has provisions that can help you save big while you work stress-free. Let's break down how to maximise these savings while staying compliant, because every rupee counts when it comes to smart financial planning.
Child Care Allowance
Understanding Section 10(14)
Under section 10(14) of the Income Tax Act, certain allowances granted by an employer to an employee are exempted, including allowances for creche facilities provided on the premises. But there are certain conditions and limitations to this exemption. The exemption is only valid up to the amount prescribed by the government, anything above that would be taxable.
Tuition fees deduction
Claiming deduction under Section 80C
Although on-site child care benefits may not be explicitly categorized under Section 80C, parents can claim deductions for expenses incurred toward their children's education. Parents can claim a deduction for tuition fees paid for the education of their children up to ₹150,000 per annum under this section. This would apply if the on-site child care facility also offers educational services.
Exemption criteria
Employer-provided child care facilities
Employers with on-site daycare facilities can extend tax benefits to their employees As per specific clauses in the Income Tax Act, in case an employer bears the cost of child care services directly or maintains a facility themselves without levying charges or at concessional rates from employees, such expenses may not be regarded as a taxable benefit in the hands of employees.
Keeping records
Documentation and proof
In order to claim tax deductions or exemptions pertaining to child care benefits, it is crucial to keep a record of all relevant documents. Receipts of payments made for child care services or tuition fees should be preserved as they will be required as proof during income tax filing. Without proper documentation, you may face difficulties in claiming these beneficial deductions.
Professional advice
Planning and consultation
Considering the complexities of tax laws and their constant changes, it might be a good idea to consult with a tax professional. They can offer tailored advice according to your individual situation and assist you in maximizing potential savings by claiming various deductions and exemptions related to on-site child care benefits.