Section 80E- Deduction for Interest on Loan taken for Higher Education

If you have taken a loan for higher studies (even though pursuing in abroad) and are repaying the same, then the interest paid on that education loan is allowed as deduction u/s 80E. However, the deduction is only available for the interest part of the loan.

This article discusses provisions related to Section 80E and its applicability.

♣ Eligible Assessee for Section 80E Deduction: Only Individual

♣ Conditions:

1. Loan must have taken for the purpose of his Higher Education or for the purpose of higher education of his relative.

2. Loan must have been taken from any financial Institution or approved charitable institution.

3. Loans taken from friends or relatives don’t qualify for deduction.

♣ Relative: Spouse and children of the Individual or the Student for whom the Individual is the Legal guardian.

Tax Deductions

♣ Higher Education: Any course of study (including vocational studies) pursued after Senior Secondary Examination (Class XII) or its equivalent.

♣ Period of Deduction: Deduction is available only for 8 assessment years starting from the year in which you start repaying the loan or until the interest is fully repaid whichever is earlier.

♣ Deductible Amount:

1. The deduction allowed is the total interest part of the EMI paid during the financial year.

2. No tax benefit for principal repayment.

3. There is no limit on the maximum amount which is allowed u/s 80E.

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April 2021