What are the changes related to child education allowance and child hostel allowance under the new income tax rules?
Revised limits of child education allowance, hostel allowance
Allowance Type
Limit
Basis
Old Limit
New Limit
Child education allowance
Maximum 2 children
Per month per child
₹ 100
₹ 3,000
Child hostel allowance
Maximum 2 children
Per month per child
₹ 300
₹ 9,000
Are taxpayers under the new tax regime also eligible to get tax benefits on child education allowance, child hostel allowance?
Who can get tax benefits of child education and child hostel allowances under the old tax regime?
How new allowance rates can decrease the tax outgo in a financial year for a taxpayer following the old tax regime.
Below is the comparative table of tax liability under various scenario (As per Sanjay Kumar)
Particulars
Old regime under old IT Rules 1961
Old regime under new IT Rules 2026
New regime under new IT Rules 2026
Basic Salary + DA
17,50,000
17,50,000
17,50,000
Less: Standard Deduction
-50,000
-50,000
-75,000
House Rent Allowance (HRA)
7,00,000
7,00,000
7,00,000
Less: Exemption
-4,25,000
-4,25,000
-
Child Education Allowance
2,00,000
2,00,000
2,00,000
Less: Exemption
-2,400
-72,000
-
(up to INR 100 / INR 3,000 per month)
Child Hostel Allowance
2,20,000
2,20,000
2,20,000
Less: Exemption
-7,200
-2,16,000
-
(up to INR 300 / INR 9,000 per month)
Other Allowances
6,30,000
6,30,000
6,30,000
Gross Total Income
30,15,400
27,37,000
34,25,000
Less: Deduction under Chapter VIII
- 80C/ 123 - Investment in PFF
-1,50,000
-1,50,000
-
- 80CCD(1) / 124 - Employee contribution to NPS
-50,000
-50,000
-
- 80D / 126 - Medical insurance premium
-75,000
-75,000
-
Total Income
27,40,400
24,62,000
34,25,000
Tax liability before surcharge and cess
6,34,620
5,51,100
6,07,500
How can an employee make these allowances part of their salary?
Under New Income Tax Rules , 2025, tax benefits such as child education allowance and child hostel allowance have been increased significantly. While the government has increased child education allowance from Rs 100 per month to Rs 3,000 per month, it has also increased the child hostel allowance Rs 300 per month to Rs 9,000 per month. The revised rates are per child for a maximum of two children. But are tax benefits on these two allowances also available to taxpayers following the new tax regime. Let’s figure out-Abhishek Soni, founder and CEO, Tax2Win explains, under the new income tax rules, the exemption limits have been significantly increased:●Child education allowance: from Rs 100 to●Child hostel allowance: from Rs 300 toSanjay Kumar, director, Nangia Global, told ET Wealth Online these allowances continue to be available only under the old tax regime, as the new tax regime generally does not permit most exemptions and deductions. Therefore, taxpayers opting for new regime would not be eligible to claim these enhanced benefits.Soni says only salaried employees can claim these two allowances. It is only available for up to two children and must be part of your salary structure.Kumar says children's education allowance applies to expenses incurred towards the education of children, while the hostel allowance applies when the child stays in a hostel and related expenses are incurred.Giving an example, Soni says, suppose you have 2 children:●Education allowance: Rs 3,000 × 2 × 12 = Rs 72,000●Hostel allowance: Rs 9,000 × 2 × 12 = Rs 2,16,000Total exemption = Rs 2,88,000“This amount reduces your taxable salary, which can lead to significant tax savings, especially for mid- to high-income taxpayers,” explains Soni.Kumar reveals for a taxpayer in the 30% tax bracket, a Rs 2,88,000 enhanced limit could translate into a tax saving of approximately Rs 83,520, excluding surcharge and cess.Soni says an employee cannot claim it separately. It must be:●Included by the employer in the salary structure (CTC)●Shown as “Child Education Allowance” / “Hostel Allowance” in salary breakupIf your salary doesn’t include these components, you can request your HR to restructure your salary to include these components.Kumar explains employees should communicate their intention to claim these allowances at the beginning of the financial year, particularly during the annual compensation restructuring or tax declaration process and provide the required details.“Employees should maintain and submit supporting documents such as proof of children's school enrolment, fee receipts or hostel accommodation documents as may be required by the employer for payroll records and tax withholding purposes,” says Kumar.