Section 80E : Income Tax Deduction on Education loan

The section 80E of the Income Tax Act, 1961 deals with the provision for deduction of tax on educational loans. Under section 80E, deduction is available to individual for interest on loans taken for higher education and not for the principal amount.

Eligibility for Availing deduction on education loan:

• Only individuals are eligible for tax deductions, Hindu undivided families (HUF) and companies cannot avail deduction under this section.
• The loan can be taken for self-purpose, spouse or your children or for any child in the capacity of legal guardian.
• Income tax deduction can be claimed only on interest component.
• Deduction can be availed only if the loan is taken for higher education i.e any type of course after passing senior secondary examination.
• Loans should be availed from recognized financial institutions only, further any loans taken from friends or relatives are not eligible for claiming deduction under this section.

Amount of deduction on Education Loan:

• Under section 80E, the deduction amount that can be claimed by individual for higher education loan will be 100% of total amount of interest.
• There is no maximum limit for claiming the deduction under Section 80E.
• Under this section only interest amount on educational loan will be allowed, principal amount will not be allowed.

Period of deduction for Claiming Tax Benefit on Education Loan:

• The deduction under this section can be claimed by individual from the year in which he starts paying interest on loan for higher education.
• Deduction under this section is available to individual for a maximum period of 8 assessment years including first year of repayment of interest on loan or until the interest on loan is fully repaid, whichever is less. Further if the repayment is done before 8 years then you cannot claim any deduction for the remaining period.

Is deduction of Education Loan available for foreign studies?

• If individual, spouse or child intends to take a loan for higher education in abroad then he can claim deduction under section 80E of Income Tax Act,1961 by which the individual is allowed a deduction of 100% of interest amount of loan taken for higher education.