80E Deduction Income Tax Act 1961 For Education Loan
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80E Deduction Income Tax Act 1961 For Education Loan

Insurance Basics & Financial Advice 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.

80E Deduction: Income Tax Act 1961 For Education Loan

8 Minute |

80E Deduction: Income Tax Act 1961 For Education Loan

What is Section 80E in the Income tax act?

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.

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.

What are the deductions available in Section 80E

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 in Section 80E on education loans?

An education loan has two components. The principal amount and the interest are applicable. The interest you will be paying can be claimed under Section 80E.

What is the deduction limit in Section 80E ?

Most deductions and exemptions that an individual can claim have a certain financial limit to them.

This is not the case here. There is no limit or cap on the interest deduction on education loans. 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.

How do you avail 80E?

You can claim the tax exemption on the education loan right from the year you start repaying the loan. To enjoy the income tax benefit on an education loan, 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.

Eligibility for tax deduction under Section 80E

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

  1. 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.
  2. A Hindu Undivided Family cannot claim any deduction under Section 80E.
  3. The benefit of tax deduction under 80 E can only be enjoyed by the individual who has applied and is repaying the loan.

FAQs - Section 80E

How is 80E calculated?

The principal and interest are the two components while repaying any loan, including an education loan. To calculate 80E, you will first need to know the principal amount and the applicable interest.

Based on this, you will get the EMI you will be repaid monthly.

For example: Let us assume your EMI is for Rs. 15,000 per month, out of which your interest component amount is Rs. 7500. This would mean that you are paying Rs. 90,000 as interest for a fiscal year. This amount would be reduced from your taxable income for eight years or until the loan is repaid.

Can I claim 80E while filing ITR?

If you have taken an education loan, which you are repaying for a family member or a legal guardian, you can claim an 80E deduction on the interest amount while filing ITR.

What are the exemptions under 80E?

The interest payable on an education loan is exempted under 80E.

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