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Pointers in Education Loan and tax benefits

With growth in economy ,rampant changes occurring in the psychological behavior regarding education, changes in spending patterns and increased cost of higher studies, many people are availing loan for educational purpose. Banking sector has been witnessing growth in education loan vertical. Education in abroad costs higher when compared to India. So parents tend to avail an education loan to bear the expenses related to higher studies.

Government has introduced section 80E to encourage the citizens to study further and thus save their taxes. 

What is Section 80E? 

DEDUCTION IN RESPECT OF LOAN TAKEN FOR HIGHER EDUCATION.  

Who can claim deduction?

INDIVIDUALS only. The deduction can be claimed by the individual who has taken the loan and who is responsible for repayment of such loan from his income.

What is the eligible amount?

INTEREST repayment of education loan.

From where should the loan be taken?

Loan should have been taken from a FINANCIAL INSTITUTION (or) approved CHARITABLE INSTITUTION. So loan taken from relatives or friends does not qualify for 80E deduction.

What does higher education mean?

All courses pursued after Secondary School Education(SSE). The course should be  a FULL-TIME course.

How long can the deduction be claimed?

Deduction can be claimed for 8 assessment years (or) until the loan is paid in full along with interest whichever is EARLIER.

What is the amount of deduction allowed?

There is NO limit on the amount of deduction that can be claimed.

Can we claim interest on loan taken for studying abroad?

Yes. Provision says loan taken for higher education in India (or) abroad.

Loan paid for whom can be allowed as deduction?

Loan taken for Self, Spouse, Children or for whom the assessee is legal guardian.

When can we start claiming the deduction?

Deduction can be claimed starting from the year of repayment of loan. Interest payment can be claimed in the year of ACTUAL PAYMENT OF INTEREST.

Composed by
CA.Konda Mounika FCA,BBM,DISA








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