Education is the cornerstone of personal and societal development. Recognizing the importance of higher education, the Indian government has introduced various measures to facilitate access to quality education. One such initiative is the provision of tax benefits under Section 80E of the Income Tax Act, 1961, which allows individuals to claim deductions on the interest paid on education loans.
What is Section 80E education loan deduction ?
Section 80E of the Income Tax Act provides for the deduction of interest paid on loans taken for higher education. This deduction is available to individual taxpayers, including both salaried and self-employed individuals. However, the deduction is applicable only for interest payments and does not extend to the principal amount of the loan.
Eligibility for Deduction U/s 80E on Education Loan
| Who Can | Only Individual Assessee |
| For What | Only Interest Paid on Education loan |
| For Whom | Higher Education of Self, Spouse of Children |
| From Where | any financial institution or any approved charitable institution |
| Deduction Limit | No Limit |
| Period | 8 Years |
Who can claim Education Loan deduction ?
Deduction under section 80E is available only to an Individual assessee. It is not available for any other kind of assessee.
The Loan taken should be for Higher Education of the self, spouse or children or for a student for whom the individual is a legal guardian.
From Where Education Loan to be taken?
The Loan should be taken from any Bank/financial institution or any approved charitable institution for the purpose of pursuing Higher Education. Any Loan from any Friend or relative is not eligible for deduction U/s 80E.
Purpose of Loan
The Loan taken should be for Higher Education of the self, spouse or children or for a student for whom the individual is a legal guardian. Higher studies include all the fields of study pursued after passing the senior secondary examination or its equivalent exam and includes both vocational as well as regular courses.
Period of Deduction
Deduction is available for 8 years starting from the year in which interest payment is paid first and 7 succeeding Years or until the interest is fully repaid whichever is earlier. This means if you have repaid education loan in 6 years then deduction will be available for only 6 Years and not 8 Years.
Amount of Deduction
The Deduction U/s 80E is available only in respect of Interest element and not in respect of principal repayment. However there is no limit on amount of deduction, whatsoever amount is paid as interest during the year can be claimed as deduction U/s 80E.
