• twitter-icon
Unlimited Tax Return Filing


Save Tax on Education Loan Interest Under Section 80E

Save Tax on Education Loan Interest

An education loan is considered not only a fund for higher studies but also plays a vital role in saving tax. As you all know, saving tax is like saving money. By this deduction, the amount of your earnings, which is subject to tax, gets reduced, ergo, reduces the amount of tax that you are liable to pay.

Interest paid on education loan is allowed as a deduction under section 80E. The principal portion is not allowed as a deduction under 80E.

Here are the conditions, which must be satisfied to avail of the deduction/ tax exemption under section 80E:

  • The deduction is available only to an individual
  • This deduction is towards the interest paid on the loan a person takes for higher studies for himself or his relatives. The interest paid is allowed as a deduction for a total of 8 Assessment Years (it starts from the AY in which the assessee starts paying interest on a loan)
  • The loan is required to be obtained from a Financial Institution or any Approved Charitable Authority. A loan taken from family or friends doesn’t qualify for deduction under section 80E.
  • The loan should be obtained to pursue higher studies whether such studies are undertaken in India or outside India. Higher studies include all the fields of study pursued after passing the senior secondary examination or its equivalent exam. It includes both
    vocational as well as regular courses.

Recommended:  Tax Benefit on Home Loan Interest

Let’s Understand the Concept in a Summarised Way:

Eligible Person – An individual
Nature – Deduction from total income chargeable to tax
Particulars – Interest paid on educational loan
Maximum Amount Allowed for Deduction – No limit specified
Maximum Time Limit – For a total of 8 AY (starts from the AY in which interest starts to be paid on such loan)
Purpose of Loan – Higher studies (i.e. after passing the senior secondary examination)
Mode of Loan – Only from a financial institution or an approved charitable institution {or as approved under Sec. 10(23C) or 80G(2)(a)}
Persons covered to undergo higher studies – Individual himself, his spouse, children
Location of pursuing Higher studies – Not specified in the section

For How Many Years Amount of Deduction Allowed & How Much?

There would be no limit on the amount of interest that you may claim under this section if you fulfil all the aforementioned conditions. Either, for a maximum of 8 years or until the interest is paid, the amount is available for deduction. So, whichever is earlier, the interest can be claimed accordingly.

The institution which has given you the loan would have a statement that you can obtain in order to identify the interest payout for each year. However, you won’t get any deduction for the Tuition Fees that are incurred or any amount towards the Repayment of the Principal loan.

Basically, the deduction is going to be done only on the interest that is paid on this loan. However, the Tuition Fees that you have paid for your children’s full-time education would be counted as an expense and are incorporated under Section 80C.

Read Also: GST Impact on Education Sector in India

The deduction can be claimed by your parents if the loan is taken for your education purpose or you can take it for your own higher education, for your spouses’ or for your children’s. As specified, the interval of the deduction is limited to eight years plus there’s no cap on its amount, it would be a wise thought to claim as much interest as possible within the period of 8 years.

Note: The law doesn’t specify whether the higher education has been taken in India or outside the country. One can avail of the deduction in any case.

Disclaimer:- "All the information given is from credible and authentic resources and has been published after moderation. Any change in detail or information other than fact must be considered a human error. The blog we write is to provide updated information. You can raise any query on matters related to blog content. Also, note that we don’t provide any type of consultancy so we are sorry for being unable to reply to consultancy queries. Also, we do mention that our replies are solely on a practical basis and we advise you to cross verify with professional authorities for a fact check."

Published by CA Suchi Sharma
I'm Suchi Sharma, a finance expert who is committed to doing things the right way. As a chartered accountant, I have the skills and knowledge to help you navigate the complex world of finance. Whether you need help with taxes and accounting, I'm here to provide you with the best possible advice and guidance. View more posts
SAGINFOTECH PRODUCTS

Leave a comment

Your email address will not be published. Required fields are marked *

Follow Us on Google News

Google News

Latest Posts

New Offer for Professionals

Super Tax Offer

Upto 20% Off
Tax, ROC/MCA, XBRL, Payroll, Online GST

Limited Offer, Hurry

Big Offer for Tax Experts

Upto 20% Discount on Tax Software

    Select Product*

    Genius Software