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Where an educational institution is maintained and owned by the employer, the cost of such education in a similar institution in or near the locality minus the amount recovered from the employee would not be regarded as a prerequisite if the value of benefit per child does NOT exceed

Where an educational institution is maintained and owned by the employer, the cost of such education in a similar institution in or near the locality minus the amount recovered from the employee would not be regarded as a prerequisite if the value of benefit per child does NOT exceed Correct Answer Rs.1,000 per month

Where an educational institution is maintained and owned by the employer, the cost of such education in a similar institution in or near the locality minus the amount recovered from the employee would not be regarded as a prerequisite if the value of benefit per child does NOT exceed Rs.1,000 per month.

Key Points

Rule 3(5) of the Income Tax Act deals with valuation of Perquisites in form of  FREE OR CONCESSIONAL EDUCATION FACILITY

Where the educational facilities are provided

  • in an educational institution that is owned and maintained by the employer or
  • in any other institution by reason of employee’s employment with employer​

1)  to the employee’s children and cost of such education or the value of such benefit

  • Does not exceed 1,000 p.m. per children: Taxable Value is Nil
  • Does exceed 1,000 p.m. per children: Taxable Value is =

Cost of such education in a similar institution in or near the locality

Less: 1000 p.m. (per child)

Less: Amount paid or recovered from the employee

2)  to the member of his household (other than employee’s children)

  • Taxable Value is =

Cost of such education in a similar institution in or near the locality

Less: Amount paid or recovered from the employee

Additional Information

  1. Amount spent for providing free education facilities to, and training of the employee is not taxable.
  2. School fees paid by the employer directly to the school or reimbursement of expenditure incurred is taxable as a prerequisite in case of all employees u/s 17(2)(iv)
  3. Children include stepchild as well as the adopted child of the employee but do not include grandchildren and other members of the household.

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