Higher education, especially post-graduate or master’s degrees, is pursued by many. However, it is a known fact that education costs are rising, and not everyone can pay for it from their savings. If you are planning to invest in higher education for yourself or a family member, you can consider taking an education loan. The interest paid on such loans is eligible for tax deduction under Section 80E of Income Tax Act, making it a financially smarter choice for managing education expenses.

One of the upsides of taking a loan on education is that you can claim a tax deduction on it. Income Tax deductions are claims to bring down your taxable income. There are various sections in the Income Tax Act of 1961 that you can use when you are computing your tax liability.

As an individual who has taken an education loan, you can claim section 80 E deductions. Section 80E of the Income Tax Act states that you can get tax benefits on the interest you pay on your education loan in a fiscal year. This is, however, not applicable to the principal amount.

A tax deduction can be claimed when you are looking to lower your taxable income. This means you will need to invest your money in tools that can help you claim an exemption or deduction.

However, while a loan cannot be termed as an investment, you are still investing funds to build someone’s future.

This means you can claim a tax exemption on an education loan. This gives rise to our question: what are the deductions available under education loan Section 80E?

An education loan has two components. The principal amount and the interest are applicable. The interest on education loan 80E is the component you can claim as a deduction under this section.

Most deductions and exemptions that an individual can claim have a certain financial limit to them. There is no upper cap under 80 E of Income Tax Act for the interest amount, which makes it beneficial for those with large education loans.

This is not the case here. There is no limit or cap on the interest deduction on education loans. In other words, there is technically no 80E maximum limit for interest deductions, making it more beneficial than capped exemptions. The benefit, however, can only be availed for a maximum of 8 years or until the education loan is repaid (whichever is earlier).

Also, taking an education loan for a course in India has an additional advantage for the taxpayer. They can claim tax exemption on the tuition fees paid to the educational institute under Section 80C.

You can claim the tax exemption on the 80 E education loan starting from the year you begin repaying it. To enjoy the income tax benefit, you must furnish a certificate from the bank, financial institution, or charitable institute that has disbursed the loan.

The certificate should clearly state the principal amount and the interest amount separately.

The eligibility criteria to claim a deduction on an education loan are as follows:

Any Individual taxpayer can enjoy tax deduction under section 80E if they have taken a loan for higher or further education for themself, their spouse or children. If they are a legal guardian to another student and has taken a loan, they can still claim the education loan income tax benefit.

A Hindu Undivided Family cannot claim any deduction under Section 80E.

The benefit of tax deduction under 80 E can only be enjoyed by the individual who has applied and is repaying the loan.