An employee receives children education allowance of Rs 3,500 per month per child for his three…

Rule 280(2) (Table: Sl. No. 7) of the Income-tax Rules, 2026, made for Schedule III (Table: Sl. No. 13) to the Income-tax Act, 2025, exempts children education allowance up to Rs 3,000 per month per child for a maximum of two children (formerly Rs 100 per month per child under section 10(14) of the 1961 Act and rule 2BB of the 1962 Rules). Since Rs 3,500 per child exceeds the ceiling and only two children qualify, the exemption is 2 x Rs 3,000 = Rs 6,000 per month and the balance of Rs 4,500 is taxable. Rs 9,000 wrongly allows three children, Rs 7,000 ignores the per-child ceiling, and Rs 10,500 treats the whole allowance as exempt. The exemption is not available where tax is computed under the new tax regime of section 202(1) (section 202(2)(a)(ii)).