Kolkata: The new financial year has ushered in a new income tax relief. However, it will be applicable to those in the old tax system. The Income-tax Rules 2026 have offered this benefit to salaried parents. The rules have increased two allowances for children — education allowance and hostel allowance — many times over and that has led to this benefit. The new allowances now stand at Rs 3000 a month and Rs 9000 a month for education and hostel allowance. Earlier a child’s education allowance was a measly Rs 100 per month and the hostel expenses Rs 300 per month. The benefits will be allowed up to a maximum of two kids. Let’s understand the calculations.
The arithmetic
To understand the maximum benefits, let’s consider a family of two kids who are in the school-going age. The expenses under these two heads will be as follows:
Education allowance for two children per year: Rs 3000 x 2 x12 = Rs 72,000
Hostel allowance for two children per year: Rs 9000 x 2 x 12 = Rs 2,16,000
Total allowance: Rs 2,88,000
Old tax regime only
There is a qualification here. One, the above calculation is only for offering a look at the benefits. Whether one is eligible for the full benefit depends on a few factors. First, the parent has to be in the old tax regime. The new tax regime offers lower income tax rates and a simple calculation and hence there is almost no deduction and exemption. The above enhanced benefits are available only under the old tax regime and will be out of bounds for those in the new tax regime.
the old regime continues to reward taxpayers who actively plan their finances and claim deductions. For individuals with children, especially those incurring education and hostel-related expenses, the revised allowances can significantly improve tax efficiency under the old structure.
Tax experts point out that those who wish to avail of these benefits could have to negotiate with the employers to restructure the salary along these heads. The actual expenses under these two heads also have to be declared to the employer at the beginning of the financial year. Proper documents might have to be submitted to get these benefits.