## Education Facility Provided by Employer

Beneficiary	Treatment
Employee himself (employer pays for his higher studies)	Fully Exempt
Children of Employee – education in employer's own institution OR in an institute that has a tie-up with the employer	Exempt up to ₹1,000 p.m. per child; excess is taxable. No limit on number of children.
Children of Employee – education elsewhere with cost paid by employer	Fully Taxable
Other family members (spouse, parents, siblings etc.)	Fully Taxable

### Quick Distinctions

Children Education Allowance (₹100 p.m. per child, max 2) is an allowance under Section 10(14) – different from this perquisite.
Free education in employer's institute or tie-up institute to children is a perquisite valued at cost to employer minus ₹1,000 p.m. per child.
Fees paid by employer for professional courses of the employee in connection with employment – treated as fully exempt as it is for the employer's benefit.

Worked example

### Example 1

Example 1: Employer's institute provides free schooling to two children of Mr. A; cost per child to employer ₹3,000 p.m. → Per child taxable = (3,000 − 1,000) = ₹2,000 p.m. Total perquisite = 2,000 × 2 × 12 = ₹48,000.

### Example 2

Example 2: Employer pays ₹40,000 fees for Mr. B's MBA (sponsored by employer) → Fully Exempt (education of the employee himself).

### Example 3

Example 3: Employer pays ₹60,000 for college fees of Mr. C's wife → Fully Taxable as perquisite.

⚠️ Common exam mistakes

Limiting the perquisite exemption to 2 children – no such cap exists for the ₹1,000 p.m. perquisite (the 2-child cap applies only to the allowance).
Treating fees paid for the employee's own course as a taxable perquisite – it is exempt.
Applying the ₹1,000 p.m. exemption when children study in an outside institute and employer simply pays fees – not allowed; whole amount is taxable.

Bare-Act text Rule 3(5) · Income-tax Rules, 1962 · click to expand

Rule 3(5) – The value of benefit to the employee resulting from the provision of free or concessional educational facilities for any member of his household shall be determined as the sum equal to the amount of expenditure incurred by the employer in that behalf or where the educational institution is itself maintained and owned by the employer or where free educational facilities for such member of employees' household are allowed in any other educational institution by reason of his being in employment of that employer, the value of the perquisite to the employee shall be determined with reference to the cost of such education in a similar institution in or near the locality; provided that where the cost of such education or the value of such benefit per child does not exceed one thousand rupees per month, the value of perquisite shall be 'nil'.

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Perquisite – Education Facility

Worked example

⚠️ Common exam mistakes