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Regular post-retirement income | Additional tax benefit on investments up to ₹50,000 u/s 80CCD (1B) - EEE Category | Regulated by PFRDA (Pension fund regulator under Ministry of Finance, Govt. of India)

Section 80E

Colleges and universities are an integral part of the students’ educational journey. However, they can be a very expensive affair. These costs should not hinder them from following their dream. It is no lie that these expenses end up acting as a deterrent to their higher education. This is where the need for educational loans arises. India has one of the highest youth populations, in addition to the educational schools and institutes, hence, the costs incurred in education are few of the liabilities which you must account for.

With the rising Indian economy and income levels, the expenses associated with education are on the rise as well. If you spend money on pursuing education, you can save on the taxes levied on income. Hence, section 80E of the Income Tax Act, 1961 was introduced to help you claim a deduction of the interest amount that you pay on the educational loan for higher education from the taxable income. 

Section 80E of the Income Tax Act, 1961

According to Section 80E of the Income Tax Act, 1961, you can claim a tax deduction on the interest paid on your education loans taken to pursue higher education. This tax deduction can be applied on the entire amount of interest from the EMI paid by you during a specific financial year. It is to be noted that only an individual can claim these deductions, corporations are not eligible for it.

If the educational loan has been taken from a financial institution or a bank with a goal of pursuing a higher education, this tax deduction under this section will be applicable. The taxpayer is required to produce a bank/financier’s statement showing the split between the principal repayments and the interest amount clearly. This must be done since the tax deduction is applicable only on the interest amount paid on the education loan. This is an initiative taken by the government to encourage more students to pursue higher education and not let their dreams be barred by financial issues.

Deduction Amount

The amount of interest that has been paid on the education loan during the specified financial year can be deducted from the taxable income according to this section. There is no limitation on the amount that can be deducted.

However, you can claim the benefit of this deduction only for a maximum of eight years or till the interest amount is paid, whichever is earlier. Also, note that you can claim deduction under this section even when you take an education loan for your children, spouse, or a student who you are a legal guardian of.

It is better if you clear the education loan within the next eight years if you wish to maximise the benefits of section 80E. This section is a great way to secure the careers of your loved ones. You can claim the deduction under this section if you take the education loan for any course to be pursued after the senior secondary school examination and it must be done from an institute/university/school which the government recognises.

Eligibility Criteria for Section 80E

The eligibility criteria for claiming the deductions under section 80E of the Income Tax Act are mentioned below:

  1. Anyone who takes a loan for pursuing higher education and is actively repaying the interest amount.

  2. Anyone who is paying the interest amount on the education loan which they have taken for their immediate family members.

Investments Eligible Under Section 80E

The following list of investments are covered u/s 80E of the Income Tax Act, 1961. The following deductions can be claimed while filing for your income tax returns:

  • Loans for foreign education

  • Interest paid on an education loan during the specified financial year

Note that you must take the loan to pursue higher studies in any educational or vocational field. The loans which are not related to education will not be covered for tax deductions u/s 80E of the Income Tax Act, 1961.

Section 80E Deductions and Limits

Below mentioned is the list of income tax deductions and their limitations under section 80E of the Income Tax Act, 1961:

  1. The interest amount that is paid on an education loan during a given financial year can be claimed for tax deductions. 

  2. There is no limitation on the tax deductions on the interest paid on an education loan. However, the deduction is available only for eight years since the beginning of the repayment of the loan.

  3. If the loan repayment tenure exceeds eight years, the interest amount paid after those eight years can be claimed for tax deductions. 

  4. Only the interest amount which is paid on an education loan can be claimed for tax deductions, however, the principal amount is not covered.

Conclusion

This deduction can be claimed by both children and parents. This implies that the person who repays the educational loan, whether the parent or the child, can avail the deductions under this section. Don’t let your financial worries stop you from dreaming big!

FAQs

✔️Can I claim the deductions under section 80E if I take an education loan for pursuing my higher education abroad?

Yes, you can claim the deductions under section 80E if you take an education loan for pursuing your higher education abroad.

✔️What is the maximum amount that can be claimed for tax deduction?

There is no limit on the amount you can claim for tax deduction under this section.

✔️Can Hindu Undivided Families claim the tax benefits under this section?

No, corporations cannot claim tax benefits under this section.

✔️Which course should I choose to claim the tax benefits under this section?

In order to claim the tax benefits u/s 80E, the education loan could have been taken for full-time education for any undergraduate and postgraduate courses in medicine, engineering, management, or applied or pure sciences comprising statistics and mathematics.