Study sops aren't a class apart

Though Jaswant Singh''s first budget seems to abound in sops, there is also a need for individuals to closely look at the fineprint. Consider, for instance, the new provision that individuals will be allowed a tax rebate on Rs 12,000 per child for a maximum of two children.
On first reading, most people are taken in by the idea that the expenses they incur on the education of their children could give them a tax rebate. But the fineprint reveals that this isn''t an additional benefit; rather, it''s only a savings avenue, and that the gain isn''t more than what one is entitled to.
The proposed educational benefit is actually a part of existing limits available under Section 88. Section 88 allows a person tax rebates, which are a percentage of sums invested in specified instruments.
This means the eligible amounts will be added up and then a certain percentage will be reduced from the tax to be paid. Consider the case of the educational benefit.
If a person has spent Rs 24,000 on two children, then a figure of either 20% or 15%, as the case may be, will be deducted from the tax to be paid. Thus, the actual tax rebate is either Rs 4,800 (20% of Rs 24,000) or Rs 3,600 (15% of income).
The specified percentages depend upon the gross total income of a person. The gross total income is the income after calculation of deductions like standard deduction and interest on housing loan but excludes benefits on account of mediclaim premium, investment in pension plans etc.
If a person has a gross total income of below Rs 1.5 lakh, the specified rate of deduction is 20%. For those with a gross total income between Rs 1.5 lakh and Rs 5 lakh, the specified percentage of rebate is 15% while there is no benefit for those with an income in excess of Rs 5 lakh.
There is also a specified limit up to which investments are eligible for the rebate. This is restricted to Rs 70,000 for instruments like PPF, NSC, life insurance premium etc. In addition, there is a special limit of Rs 30,000 just for infrastructure bonds, which means that the maximum amount a person can invest to claim benefits here is Rs 1 lakh.
A reading of the appropriate change shows that the benefit of educational expenses limited to Rs 12,000 for a maximum of two children, amounting to Rs 24,000, actually falls under the Rs 70,000 limit.
This means the benefit is just a part of the overall existing rebate already provided and is thus not an extra benefit. In addition, it falls within that part of the limit which is usually exhausted by most people because they have regular investments in these areas and for this category of people, there is nothing much to cheer about.
Many non-salaried people, for instance, use their entire Section 88 limit to invest in PPF, while the salaried also have the benefit of their contribution to the provident fund, which qualifies for benefits.
Repayment of capital for a housing loan up to Rs 20,000 is also eligible for rebate. All this leaves very little space within the Rs 70,000 limit for utilising educational expenses to get tax breaks.
Educational expenses that qualify for the benefit are any sort of tuition expenses at the time of admission or thereafter to any university, college, school or educational institution situated within India for the purpose of full-time education.
According to tax and investment experts, for people who wish to take the benefit of such expenses, it could very well have to come at the cost of investments normally made.