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4.8 Star User RatingWith the growth in the economy, the spending on education has also increased. The education sector is evolving daily, increasing the burden on the wallet of middle-class households in the country. Education loans do not only help you in higher studies in India or overseas; it also helps you save a lot of taxes. Section 80E provides a tax deduction on the “interest component” paid on a loan taken for higher education by an individual assessee or on behalf of their spouse or children.
Section 80E is the income tax deduction from taxable income, which covers the deduction on the “interest component” paid on higher education loans from the notified financial or approved charitable institutions or banks. Interest paid on education loans taken for higher studies of self, spouse, or children (including for whom you are the legal guardian) can be claimed as a deduction from the taxable income.
The individual can claim this deduction on interest payment on an education loan taken for self, spouse, children, and a person for whom the assessee is a legal guardian. The person repaying the loan for the above-mentioned people can benefit from the 80E deduction.
If your parents are sharing the EMI payments, then the extent to which they pay interest part of the EMI can be claimed by them and the rest by you.
Please note that deduction u/s 80E can be claimed by individuals only. Hindu Undivided Families (HUF) and companies are not eligible to avail deduction under this section of Income Tax Act.
There is no maximum or minimum deduction limit specified under section 80E. The deduction amount on interest payment is not impacted by the interest rate charged by the financial or charitable institution, the amount of the loan, or any other factor. This section dedicates the actual interest paid on education loans during the financial year.
If you want to claim the benefit of 80E, then the loan must be taken from notified:
Section 80E states that the interest paid towards an education loan should be taken from an approved charitable institution or a recognized financial institution. Any other entity from which the loan is taken is not eligible for the deduction. These institutions can be identified as follows:
The deduction under section 80E can be claimed when filing your income tax return, and no documentary proofs are required to be attached. The documents mentioned below should still be kept safely in case required to be submitted to the income tax department in case of any future scrutiny.
The deduction under section 80E can be claimed for a maximum of 8 assessment years from the year you start repaying the loan or until the interest is fully repaid, whichever is earlier.
In the case where the complete repayment of the loan is done in 5 years only, then tax deduction will be allowed for 5 years and not 8 years.
For example,
You can calculate the tax benefits under section 80E as under For example,
| Particulars | Amount |
| Income | Rs 6,00,000 |
| Less: Interest paid (Deduction u/s 80E) | Rs 1,00,000 |
| Net Taxable Income | Rs 5,00,000 |
The interest paid (Rs 1,00,000) on education loan is deducted from the taxable income (Rs 6,00,000). As a result of which the net taxable income is reduced to Rs 5,00,000.
Yes, the deduction can be availed for foreign education loans also. The assessee should be an Indian citizen and the loan should have been taken from an recognised Indian financial institution or approved charitable institution. Thus if these conditions are satisfied then it does not matter that the course and college or university is from outside India.
No, for claiming the deduction under section 80E, the loan must be taken from an Indian Financial institution or specified Indian charitable institution or Indian Bank.
No, you cannot claim deduction in this case. The loan has to be from a recognized Indian financial or an approved charitable institution. A loan taken from an employer, friend or relative is not allowed for deduction. Though the terms are the same, you took a loan from your employer so you are not qualified to claim income tax deduction under section 80E.
As mentioned above, the tax deduction under section 80E is available for the interest paid on education loans taken for higher studies. Now, these higher studies, as defined by the Act, are as follows: All the courses taken after successfully completing class 12th.
Interest on loans taken for pursuing higher education (including vocational studies) is eligible for deduction u/s 80E.
