What is Section 80E?

Section 80E of Income Tax

Section 80E of the Income Tax Act, 1961 allows for tax deductions on interest paid for education loans taken to pursue higher education. As per Section 80E, the tax deduction is applicable on the total interest from EMI paid by the taxpayer during a given financial year. Only an individual can claim 80E deductions, companies and corporations are not eligible.

This tax deduction is only applicable on loans taken from a bank or a financial institute with the goal of pursuing a higher level of education. The taxpayer will need to get a statement from their bank or financial institution that clearly states the split between the interest and principal repayments, as the tax deduction is only applicable on the interest. This section has been introduced to encourage more students to pursue a higher level of education.

Investments That Come Under Section 80E

Section 80E of the Income Tax Act covers the following list of investments that can be claimed for income tax deductions. You can claim these deductions when filing for your income tax returns.

 

  1. The interest paid on an education loan during a given financial year

  2. Loans for foreign education

It should be noted that the loan must be taken to pursue higher studies in any educational or vocational field. Any loans not related to education are not covered for tax deductions under Section 80E.

Eligibility for Section 80E

Following is the eligibility criteria for claiming deductions under Section 80E of the Income Tax Act:

 

  1. Anyone who has taken a loan for higher education and is actively repaying the interest on their education loan is eligible for Section 80E of the Income Tax Act.

  2. Anyone paying the interest on an education loan for their immediate family is eligible for Section 80E. For example, parents repaying an education loan for their children can claim tax deductions on interest paid.

Section 80E Deductions and Limits

The following is the list of income tax deductions and their limits under Section 80E:

 

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

  2. There is no limit to the tax deduction on interest paid for an education loan. However, the deduction is only available for 8 years since the beginning of the repayment of the loan.

  3. If the term of loan repayment exceeds 8 years, the interest paid post 8 years cannot be claimed for tax deductions.

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

Frequently Asked Questions

  • ✔️What comes under 80E?

    All interest paid on educational loans taken for the purpose of pursuing higher education during a given financial year is covered under Section 80E of the Income Tax Act, 1961.  

  • ✔️What is the Section 80E deduction limit?

    There is no deduction limit on the tax deductions under Section 80E. However, the tax deduction cannot exceed the interest paid on educational loans during a given financial year, as the deduction is applied on the interest and not the principal payments. It should be noted that the tax deduction is only available for 8 years after you start the repayments.  

  • ✔️How can I claim deduction under Section 80E?

    You can claim deduction under Section 80E at the time of filing for your annual income tax returns. At the time of filing the tax deduction, you may also have to submit a statement from your bank or financial institution stating the amount of interest and principal paid on your education loan.  

  • ✔️Does Section 80E also cover foreign education?

    Yes, interest on loans taken for studying abroad are covered under Section 80E and can be claimed as a tax deduction, as long as the loan has been taken with the aim of pursuing higher education.  

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