Tax saved is money saved. Therefore tax planning is a must for all the tax payers. One of the best way to save tax for those tax payers who have children, who are either just entering college or going to take professional degree course, must think about not investing his own savings in education. Rather he should take the educational loan which is easily available these days. Here is a guide that will assist you to know tax benefits on education loans. These benefits help you to reduce the overall cost of your education loan.
The deduction under section 80E is available to an individual if following conditions are satisfied:
1. Deduction under section 80E is available only to Individual not to HUF or other type of Assessee.
2. Section 80E Deduction amount: – The amount of interest paid is eligible for deduction and moreover there is no cap on the amount to be deducted. You can deduct the entire interest amount from your taxable income. However there is no benefit available on the repayment of principal amount of the loan.
3. Section 80E Deduction is available if Interest is been paid during the previous year and was paid out of income chargeable to tax which means if repayment is made from income not chargeable to tax than deduction will not available. There is no upper limit of the rate of interest which will be allowed as a deduction.
Note: – Earlier to previous year 2006-07 the above deduction was available only for Interest on loan taken and repaid by the assessee for his own studies.
4. Interest should have been paid on loan taken by him from any financial institution or any approved charitable institution for the purpose of pursuing his higher education. Interest on Loan taken from relatives or friends will not be eligible for deduction under section 80E.
a. approved charitable institution means an institution specified in, or, as the case may be, an institution established for charitable purposes and [approved by the prescribed authority] under clause (23C) of section 10 or an institution referred to in clause (a) of sub-section (2) of section 80G;
b. financial institution means a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act); or any other financial institution which the Central Government may, by notification in the Official Gazette, specify in this behalf;
5. Loan should have been taken for the purpose of pursuing higher studies of Individual , Spouse, Children of Individual or of the student of whom individual is legal Guardian.
Higher studies means full-time studies for any graduate or post-graduate course in engineering, medicine, management or for post-graduate course in applied sciences or pure sciences including mathematics and statistics;
Income tax department has added (W.e.f. A.Y. 2010-11) additional fields of studies (including vocational studies) pursued after passing the Senior Secondary Examination or its equivalent from any school, Board or University recognised by the Central or State Government will also be covered under deduction in respect of interest paid on loan taken for higher education.
6. Interest should have been paid for the loan taken for the purpose of pursuing his higher education or of the spouse and children. From A.Y. 2010-11 Relative also includes student for whom the individual is the legal guardian.
Education loan taken for siblings (brother / sister) or other relatives (in-laws, nephew, niece, etc.) would not qualify for section 80E benefit.
7. Deduction period: – Deduction shall be allowed in computing the total income in respect of the initial assessment year* and seven assessment years immediately succeeding the initial assessment year or until the interest is paid by the assessee in full, whichever is earlier.
The tax benefits on education loan are only valid once you start the repayment and moreover they are only available up to eight years. For instance if your loan tenure exceeds eight years, you cannot claim for deductions beyond eight years.
Hence it is better that the education loan is repaid within eight years. Unless if the loan amount is very high and it is difficult to afford a high amount of equated monthly installment (EMI), one should not opt for education loan with longer tenure.
*Initial assessment year means the assessment year relevant to the previous year, in which the assessee starts paying the interest on the loan.
8. Loan should be in the name of Individual: – Deductions on education loan can only be claimed if the loan has been taken in your own name. If your parents, spouse or sibling has taken the loan for your studies, then you are not entitled to get tax benefit.
9. The loan includes not only tuition or college fees but also other incidental expenses for pursuing such studies like hostel charges, transport charges etc.
10. Repayments of education loan NOT covered under Section 80C.
11. There is no condition that the course should be in India. This special deduction is also allowed even for education loan availed for study abroad.
12. An individual can avail of tax benefit if he/she has taken an education loan to support higher studies of self, spouse, children or for the student of he/she is the legal guardian. So education loan taken for siblings or other relatives don’t qualify for Section 80E benefit.
13. To avail tax benefits on education loan, inform your company’s HR/accounts department so that less TDS is deducted from your salary. Else, you can claim it by filing tax returns.
Frequently asked question and answers
Question: Mr. Ramesh has taken a Education loan for his higher studies on 20.06.2010 and started paying installments including interest from 20.06.2011, from which year and up to which year Mr. Ramesh can claim deduction under section 80E of the Income Tax Act, 1961?
Ans: Mr. Ramesh will get tax benefit under section 80E from financial year 2011-12 i.e initial year of payment and next seven year i.e up to previous year 2018-19 or upto full payment of loan which ever is earlier.
Question: Mr. Manoj Sharma has taken a loan for his higher studies on 20.06.2010 and paid Rs. 25,000/- interest in previous year and his father has paid 20,000 interest payments in previous year 2014-15. Who can claim benefit of deduction?
Answer: Only Mr. Manoj will be eligible for deduction of Rs. 20000. His father is not eligible for deduction, the reason behind this is that loan has been taken by Mr. Manoj and not by his father, despite the fact that father satisfies the condition of relative and paid the interest too.
Question: Can son /daughter can claim the benefit of deduction for loan taken for higher studies of his /her father/mother.
Answer: No. Parents can claim the deduction in respect of interest paid on education loan taken for the education of children but children can not claim the deduction in respect of Interest Paid for Education of Parents.
Question: Mr. Ram has taken a loan for his higher studies ,and has repaid the loan interest amount but unfortunately he has not succeeded in exams and could not complete his higher studies.
Answer: As per section loan should be for “pursuing his higher education or for the purpose of higher education of his relative” and Ram has pursued the higher course so he should be eligible for the deduction as he has fulfilled all the conditions and there is no condition that the course assessee has persuaded should be completed or assessee should be passed definitely in the course the main demand of the section is purpose of the loan should be higher education and it should be drawn and used for the purpose of higher studies for his or his relatives.
Question:- I would like to know the tax benefit gained on bulk repayment of an education loan. Considering it as a bulk repayment,is the benefit available on the total interest “payable” in a particular financial year or the total interest actually paid in that year ? Suppose i joined college in 2008 and took the loan (of say 2 lacs). Say, before 2014, the interest accrued was 80,000/- and in 2014 it is 20,000/-. Now I make a bulk repayment of 3 lacs in June, 2014. So, for the year 2014-2015, will the tax benefit be available on the whole 1 lac Interest component or only 20,000/-?
Answer:- The deduction U/s 80E is available from the assessment year in which the assesse starts paying interest on loan and the seven immediately succeeding assessment years or until the the interest is paid in full, whichever is earlier. So the deduction is available for maximum 8 assessment years. Accordingly in the given question the assessee pays the entire amount of loan including interest in in previous year 2014-15, so the deduction of Rs 100,000 U/s sec 80E shall be allowed only in the A.y 2015-16 only as the loan is squared-off.
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(Republished with amendments)
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My daughter has taken Education loan in which my wife is also coborrower. I am guarantor. Can I claim deduction under section 80 E if I repay from my salary.
My son has taken educational loan in which myself and my wife are co applicant and the property of mine has given as collateral security. Can I claim rebate under section 80E? He is not claiming
Hi Sir, I had taken loan from CBI and i am paying the monthly EMI with interest for education loan .Can i claim interest deduction under sec 80E of IT Act.
I took education loan for my son-in-law. Can I take income tax benefit under section 80E as I am co-borrower for the education loan for my son-in-law
I came across this loan company on Facebook and I contacted the email I saw and all a sudden I was approved of a loan of $60,000usd so I never believed all this can work till I was credited $60,000usd I will advice anyone who is in need of a loan to contact this loan company for help of a loan this is the company email [FEDERALOAN @ GMAIL . COM]. or whatsapp or call + 1 8 4 5 7 3 1 5 7 1 6.
1. I purchased property in pune.and argeement was made in 26/5/2017. I paid 1% Vat. Now i am paying 6% GST and 6% CGST . i also paid 4.5 lakh construction charges. whether it is possible to have any benefit in income tax while filling return.
2.I am using my own car for going to office daily. I am Govt employee. How can enter the depreciation cost and car insurance amt while filling tax return and under which head
I am taking an overdraft loan based on my FD’s with the bank for my son’s MS education abroad.
The bank charges an additional interest of 2% from whatever interst it pays me on my FD’s.
Will i be eligible to claim interest deduction under section 80E on the interest charged to me by my bank.
I have borrowed loan for my daughter’s education. The EMI starts from Aug 2018, but I have paid some amount in Dec 2017. Naturally, this is towards interest. But the Bank does not give a certificate to this extent. Now, can I claim benefit under 80E for the amount I paid in Dec 2017 for the Assessment Year 2018-19?
I am joint borrower for my brother’s education loan.can I claim IT exemption.poreddynarendarreddy
For my son’s study in USA he had taken loan from SBI and he is the main applicant and I am the co applicant.my wife wants to repay the interest for edu loan in which she is not even a co barrower .Can she claim deduction under sec 80E of IT Act. Pl clarify.
My son has taken over seas educational loan from SBI,after graduating he has placed in Germany & from salary he has started repayment of ed.loan from Dec2010.He has served for 3 yrs in Germany, The employer has deducted tax at source, and my son also not disclosed regarding repayment of ed.loan to HR.Whether he can claim interest paid for educational loan from already tax deducted by German Income tax authorities,Please clarify.
Education Loan has been taken fro Overseas Bank named OCBC Singapore. Is interest charged to account is eligible for deduction under section 80 E of Income Tax
hi sir, i have taken education loan in 6-11-2007 but started repayment from 24-1-2013,but haven’t claimed tax benefits . starting from this financial year i.e 2016 till how many years i can claim tax benefits under 80E.
Hi Sharat here, I have taken education loan 3.5 lakh and 50k amount leftout. From this year I eligible for tax payer and started getting CTC more than 6 lakh. How much amount can be exempted & how to minimise tax pay from coming days. Already having life insurance plan (money back policy) yearly paying Rs 30000/-
Hi,
I have taken education loan from SBI and started paying the interest from 2015.
Can i opt for deductions in FY 2015-2016?
Also, i need to submit the required documents in Jan 2016 for tax deductions. But the bank doesn’t provide the Loan Interest Certificate in Jan month for FY 2015-2016. Can you please suggest what document is required to be submitted?
I would like to avail the educational loan from the bank for my daughter’s higher studies abroad with my daughter as first applicant (borrower) and myself and my wife as co applicants. If we (parents) service the loan initially till our daughter gets a job and there after if she service the balance of the loan, Can we parents take the IT deduction in the proportion of our payment towards interest on the loan during the period we service the loan and balance period daughter can take if she services the loan.
I would appreciate your advise in this regard.
Thanks & regards,
Shankar
Dear Sir,
I have paid about 1.25 lakhs of fee for my brother-in-laws Post Graduation course for second year.
Please let me know if I can claim tax benefit for the same.
Thanks in advance,
Kalicharan.
with out making the registration fee ok
if education loan of rs 10 lacs for 5 yrs @9.9% simple inerest is taken then what is the income tax benefit if the loan is preclosed in 3 yrs
My son has got married. My daughter in-law has taken education loan, repayment of which yet to be started. If I start paying her load, will I get tax benifits.
The loan is in the name of my daugher in laws with her father as co-applicant.
Please let me know.
Dear Sir
I have taken a loan in 2005 for my higher education. my education completed in 2008. but i didnt got job till the year 2011. my father used to pay the interest on the loan amount. till date the loan is not completed after paying so much of interest and installments. there is a interest subsidy announced by govt of india in budget on education loan. want to know about that so that i can get benefited and finish the loan asap.
Please reply.
Hi
I am paying fee about 1.25 lakh per year supporting my sister higher education. Can I save tax for the fee amount I am paying for the study of my sister? If I can, Please suggest the documents tat I need to filing return for year 2014-15.
Thanks!
Sir,
After repayment of interest, Principal amount starts getting repaid, but then also banks charge interest as per agreed rates on monthly basis, can that interest be claimed as deduction u/s 80E ?????
I am co-applicant for the Education loan taken by my daughter. I have been paying the interest from my salary. Can I claim IT benefit U/S 80E as a second applicant?
Thanks & Regards.
will the interest on education loan for executive mba qualify under this section?
I am paying college fees for my brother is there a way i can claim tax exemption for that?
Question:
I haven’t paid my Education Loan for last year and i paid that amount this financial year. Will i be able to give that in this years Income Tax relaxation.?
My father had taken education loan for my sister and brother respectively. Now my father is dependent on me and my sister and my brother are also dependent on me. NOw iam paying emi as legal guadience to bank can i claim to tax deduction
my father took education loan for my studies and at that time i was minor. now i am repaying that education loan. so am i eligible for deduction under section 80 E.
I have taken an education loan in the year 2008. My father has been paying the interest upto August 2014. From august 2014 I also started repaying the loan along with my father. So how much amount i can claim for tax benefit. Loan details
Loan amount 1,8000+, interest rate of 14.25% per annum.
I have taken an education loan during my engineering “2008-2012”. and started paying EMI after 2 years on completion that is i have started paying EMI from july-2014. I just wanted to know? when can i update the investment declaration and which are all the prrofs required?
Dear Sir,
I have a query related to IT Tax exemption under SEC 80 E. I have taken two education loans from two different banks for UG & PG courses. Whether I am eligible for Tax exemption for the interest paid on both the Loans under Section 80E. Kindly answer this.
We have availed education loan from nationalzed Bank for my daughter’s
higher education in U.S.A.(We are joint borrowers myself ,my wife and my daughter.) Can we claim deductions on interest payment?
Thanks
jagdish kanade
I have taken education loan in 2005 in the Joint names of myself and daughter for MBBS.she was minor at taht time Now she is pursuing post graduation and getting stipend what is the benefit under income tax for repayment of interest and instalment
After B.E., my son has served for 4 years in an MNC. Now he gets admission for 2 years PGP at IIM-B. Total Fee payable is 17.00 Lakhs + other Expenses. Our queries are –
1. Myself & my Wife have paid Ist term Tution Fee (2014-15) of our Son for the above course from our income chargeable to tax. Similarly, we both shall be paying Ist Installment of Tution Fee of our Son during second Year 2015-16 from our savings.
(Question) Can we both (myself & my wife) get rebate u/s 80-C of IT Act towards Payment of Tution Fee for both the F.Ys.
2. For remaining amount of Tution Fees & other expenses (for 2014-15 & 2015-16), my Son intends to borrow Education Loan from Bank in his name and myself & my wife – being the Co-Borrowers. After completion of PGP, he may get job.
(Question) : In case we three (my son, myself & my wife) collectively repay the Education Loan from our Savings jointly or individually in equal proportion or otherwise from our income chargeable to tax, in that case can all of us ( i.e. my son, myself & my wife ) will be eligible to claim IT Rebate on interest paid during each F.Y.
Your valuable advice is solicited, so as to apply for Loan accordingly.
Thanks & Regards
Satish Kumar Sappal 98882-47762
1.let me know who can avail the education loan interest benefit. Student or Parents ?
2.There is a Central Govt scheme for providing interest subsidy on Educational loans for the economically backward group with an annual income below Rs 4.50 lakhs. , during the period of study, for interest paid in previous year.
Can interest paid by individual will claim u/s 80E ir respective of interest amount is reimbursed by Central Govt.
I have taken loan to my son education and he is studying in England and i am doing service in BPCL, Can i claim loan interest u/s 80E. Pl specify urgently.
I have took 1,00,000/- as educational loan from a charitable trust to pursue my education. Now i am earning 3,00,000 per annum so, i need to pay tax of 12,360 per annum. Now i am planning to pay loan back to trust , will it helps in tax excemption?
if it exempts from tax paying , wt is the amount, i shopuld pay per month to save complete tax.
please help me out
Deepak
9743225287
Hi, I have taken education loan in the year 2001. From 2002 onwards, I am paying interest only. Still I have not yet cleared the principal amount. Its already completed 10 years. Now I am planning to close this loan by paying total amount (principal + Interest). Am I eligible to show the interest amount in 80E this year?
dear Sir
please confirm if an education loan taken From CREDILA for higher studies in the USA , is eligible for the DEDUCTION OF INTEREST under SECTION 80 E.
Dear sir..
I want to take loan for my brother’s M.Tech education,Can i claim deduction of interest under section 80E.If not than under which section can i claim deduction,please clarify.
dear sir…!
i have taken education loan for my mba education… and i have submitted all the documents to the bank from where i have taken loan related to loan intrest rate rebate during education period ..issued by… human resourse development……my course duration was 2009-11 …i want to know that when it will be implemented…..?
Dear Sir,
I have taken Eduction loan for higher eduction of my son.
Now I have started repayment of loan from April. I request you to inform me whether there is limit of duduction from salary on interest paid for Eduction loan.
Regards.
Hi ,
My father took education loan for me 3 lac in 2007 to 2011 for 4 year Btech degree, and this amount i am paying after finishing my btech. so how can i get the tax benefit till when i am paying this amount.Please help me out in this.
I took edu loan 2 Lac in 2002 to 2006 for 4 year professional degree,and this amount complete not paid yet now then can i get benifit from IT in this year
There is a Central Govt scheme for providing interest subsidy on Educational loans for the economically backward, during the period of study, the salient features of which may be
highlighted in your article. The subsidy would lessen the burden for the students from the economically backward group with an annual income below Rs 4.50 lakhs.