Deduction for Interest on Education Loan : Section 80E Income tax Act

deduction for interest on education loan income tax act
deduction for interest on education loan income tax act

 

1. Eligible Assessee

Only individual is eligible for claiming deduction for interest paid on education loan under section 80E.

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2. Eligible Amount

a) An individual can claim deduction of amount of interest paid on education loan.

b) There is no capping on the amount to be deducted.

c) However, principal amount paid on education loan cannot be claimed as deduction.

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3. Conditions

a) Interest is paid out of income chargeable to tax. Eg – Deduction not available if interest is paid out of agricultural income.

b) Interest should have been paid on loan taken by him from any financial institution or any approved charitable institution for the purpose of pursuing his higher education. Interest on Loan taken from relatives or friends will not be eligible for deduction under section 80E.

c) Loan should have been taken for the purpose of pursuing higher studies of Individual , Spouse, Children of Individual or of the student of whom individual is a legal Guardian.

Note - Deductions on education loan can only be claimed if the loan has been taken in your own name. If your parents, spouse or sibling has taken the loan for your studies, then you are not entitled to get tax benefit.

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4. Period of Deduction 

Deduction shall be allowed in computing the total income in respect of the initial assessment year* and seven assessment years immediately succeeding the initial assessment year or until the interest is paid by the assessee in full, whichever is earlier.

Initial assessment year means the assessment year relevant to the previous year, in which the assessee starts paying the interest on the loan.

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5. Important Points 

a) Deductions on education loan can only be claimed if the loan has been taken in your own name. If your parents, spouse or sibling has taken the loan for your studies, then you are not entitled to get tax benefit.

b) He loan includes not only tuition or college fees but also other incidental expenses for pursuing such studies like hostel charges, transport charges etc.

c) Education course can be in or outside India.

d) “approved  charitable  institution”  means an institution established for charitable purposes  and  approved  by the prescribed authority  section  10(23C),  or an institution referred  to  in section 80G(2)(a);

e) “financial  institution”  means a banking company  to which  the Banking Regulation Act, 1949 applies  (including  any bank or banking  institution referred to in section 51 of that Act);  or any other financial  institution  which the  Central Government  may, by notification in the Official Gazette, specify  in this behalf;

f) “higher education” means any course of study (including vocational studies) pursued after passing the Senior secondary  Examination  or  its  equivalent  from  any  school,  board  or  university recognized by the Central Government or State Government or local authority or by any other authority authorized by the Central Government or State Government or local authority to do so.

 

 

 

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