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Section 80E
Deduction in respect of interest loan taken for higher education
Tax Benefits under Section 80E
An individual who has taken an education loan for higher education can avail the tax deduction under Section 80E of the Income Tax Act, 1961. The best part about this deduction is one can avail it even after availing the maximum provided deduction of Rs.1,50,000 under Section 80C.
Note - The tuition fee paid towards the education is also eligible for deduction under Section 80C of the Income Tax Act, 1961. However, the interest paid towards the education loan for higher education gets deduction under Section 80E.
Eligibility to Get Tax Deduction under Section 80E of the Income Tax Act, 1961
The eligibility criteria to get income tax deduction under section 80E of the Income Tax Act, 1961 are
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This tax deduction can be availed by only individuals but companies and Hindu undivided families (HUF) cannot avail the tax exemption under 80E. In addition to this, the loans that one takes from relatives and friends cannot avail the benefit under this section of the Income Tax Act.
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One can claim the Section 80E Income Tax Deduction only for the interest that one pays against the education loan taken.
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The benefit of this deduction can be availed by both parent and child. This means the person who is repaying the education loan, whether child or parent, can claim the deduction.
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The deduction is available only against the loan that is taken for higher education.
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The Income Tax exemption under Section 80E can be availed only by the person under whose name the loan is taken and is liable to pay the taxes.
Amount of Deduction
The allowed deduction is the total interest of the EMI that one pays during one financial year. However, there is no limit on the maximum deduction amount, but an individual has to get a certificate from his/her bank for the same. This certificate should have separate descriptions of interest and the principal amount of the education loan for that specific financial year. In this way, there will not be any tax benefit for the principal amount; instead, the interest is eligible for the same.
Meaning of certain terms
| Term | Meaning | |
| (i) | Relative | Spouse and children of the individual or the student for whom the individual is the legal guardian |
| (ii) |
Higher education |
It means any course of study (including vocational studies) pursued after passing the Senior Secondary Examination or its equivalent from any school, board or university recognised 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. Therefore, interest on loan taken for pursuing any course after Class XII or its equivalent, will qualify for deduction under section 80E |
| (iii) | Period of deduction |
The deduction is allowed in computing the total income in respect of the initial assessment year (i.e. the assessment year relevant to the previous year, in which the assessee starts paying the interest on the loan) and seven assessment years immediately succeeding the initial assessment year or until the interest is paid in full by the assessee, whichever is earlier |
| (iv) |
Approved charitable institution |
It means an institution established for charitable purposes and approved by the prescribed authority under section 10(23C) or an institution referred to in section 80G(2)(a). |
| (v) |
Financial institution |
It means
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Mr. Ram has taken three education loans on April 1, 2021, the details of which are given below
| Loan 1 | Loan 2 | Loan 3 | |
| For whose education loan was taken | Ram | Son of Ram | Daughter of Ram |
| Purpose of loan | MBA | B. Tech | B.Tech |
| Amount of loan () | 6,00,000 | 3,00,000 | 4,50,000 |
| Annual repayment of loan () | 1,20,000 | 48,000 | 88,000 |
| Annual repayment of interest () | 24,000 | 12,000 | 16,000 |
Deduction under section 80E is available to an individual assessee in respect of any interest paid by him in the previous year in respect of loan taken for pursuing his higher education or higher education of his spouse or children. Higher education means any course of study pursued after senior secondary examination.
Therefore, interest repayment in respect of all the above loans would be eligible for deduction. Deduction under section 80E = 24,000 +12,000 +16,000 = 52,000.
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