## Valuation of Educational Facilities [Rule 3(5)]

### Taxability

School fees paid or reimbursed by employer (for employee's children or any household member) → perquisite in the hands of all employees.
Education facility provided at a school maintained by the employer, or at a concessional rate by reason of employment → perquisite for specified employees only.

### Valuation of the benefit

Circumstance	Gross Perquisite Value
Institution owned & maintained by employer	Cost of similar education in a comparable institution in/near the locality
Free/concessional education at any other institution by reason of employment	Nil if cost ≤ ₹1,000 per month per child; excess is taxable
Other cases	Expenditure actually incurred by the employer

Any amount recovered from the employee is deducted.

### Critical exemption note

The ₹1,000 p.m. per child exemption is allowed only for the employee's children. It is NOT available where the education facility is provided to other members of the household.

Worked example

### Example 1

Employer-maintained school: Employer runs a school; cost of similar education in a comparable nearby institution = ₹1,500 p.m. per child; the employee's 2 children study free.

Perquisite = ₹1,500 × 2 × 12 = ₹36,000 (specified employees). [If cost ≤ ₹1,000 p.m. per child, fully exempt under the relaxation.]

### Example 2

Outside institution, concessional: Employer pays ₹1,200 p.m. per child to an outside school for the employee's 1 child.

Exemption = ₹1,000 p.m.; taxable = (₹1,200 − ₹1,000) × 12 = ₹2,400.

⚠️ Common exam mistakes

Applying the ₹1,000 p.m. exemption to household members other than the employee's children.
Treating the ₹1,000 p.m. relaxation as a blanket exemption — once cost exceeds ₹1,000 p.m. per child, the entire amount (not just the excess over an institution-maintained value) framework must be applied correctly per the relevant clause.
Treating fees reimbursed by employer as taxable only for specified employees — reimbursement is taxable for ALL employees.

Reference: Rule 3(5) — Income-tax Rules, 1962

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