Income Tax Deduction on Education Loan [Section 80E]


In this article we will discuss the Income Tax deduction on Education Loan under Section 80E of the Income Tax Act. This deduction is available under Chapter VI-A of the Income Tax Act.

Also Read: Income Tax Deduction on House Rent Allowance

Who is eligible for this deduction?

Only an individual can claim deduction on education loan.

What amount is eligible for deduction?

Only the interest paid on repayment of education loan is eligible for deduction under Section 80E of the Income Tax Act. No deduction is available for principal repayment.

Conditions for claiming the deduction

The loan should be taken for higher education of self, spouse or children or any person for whom the individual is a legal guardian.

The loan should be taken from any Bank, Financial institution or any approved charitable institutions. Loan from any relatives or friends does not qualify for this deduction.

Loan can be taken for higher studies in or outside India. Higher Studies means studies pursued after clearing higher secondary or its equivalent examination.

Total INTEREST paid within the financial year qualifies for the deduction. A repayment schedule should be obtained from the bank which separates the Principal and the Interest component of the EMIs paid during the Financial Year.

There is no ceiling limit for deduction under section 80E.

Tenure of Repayment beyond 8 years

It must be noted that the deduction for interest on education loan under income tax is available for a period of 8 years including the year in which the repayment was started.

Thus the total interest repaid for the first 8 years can only be claimed as deduction under Income Tax. Any interest repayment on education loan beyond eight years will not be available for deduction under section 80E.

Thus it is advised to keep the repayment tenure of education loan within 8 years.

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