CA Subhash Srinivasan

DEDUCTION U/s 80E

1. Conditions :

  1. Applicable to Individuals not to HUF
  2. Loan must be taken for Higher studies
  3. Loan must have been taken from approved financial and charitable institutions
  4. Only Interest is allowed as deduction
  5. Deduction is allowed only for 8 years from the date repayment not more than that

2. Deduction: Amount paid as interest is available for deduction. Entire Interest amount is allowed as deduction. Repayment of Principal amount is not allowable as deduction. The deduction is available for a total of eight years or till the principal and interest amount have been repaid, whichever comes earlier. This eight years would include the year in which the loan repayment starts and seven years following this year. So even if your loan tenure exceeds these eight years, no deductions can be claimed beyond this.

3. Note : Deduction ll not be available if the repayment is not made out of income chargeable to tax. The loan should be taken for the sole purpose of higher education. It could either be for the individual, spouse or children. Loans for the higher education of siblings, in-laws, nephew or niece, will not qualify for any deduction. Also, from assessment year 2010-11, deduction could be claimed for the student for whom the individual or assessee is the legal guardian.

4. The education loan should be taken from either a financial institution or an approved charitable trust. Loans taken from friends, employer or relatives do not qualify for a deduction.

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5. 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.

6. Higher Studies : (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.

Loan must be 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;.

DEDUTION U/s 80C – Tution Fees

  1. Conditions :

i)     The deduction is available to Individual Assessee and not for HUF.

ii)    The Deduction is available for any two children.

  1. This is the only clause u/s 80 C where assessee cannot claim tax benefit for expenditure done on himself. Means if assessee has paid tuition fees for his studies, he will not be eligible.
  2. Deduction is not available for tuition fees paid for studies of spouse.
  3. The deduction is available for Full Time courses only, so no deduction for part time or distance learning courses.
  4. The fees should be paid to university, college, school or other educational institution, so no rebate for private tuitions.
  5. Tuition fees paid for coaching courses for admission in professional courses or any other type of courses are not covered as that fees is not paid for FULL time education.
  6. In This section tuition fees has a wide meaning than normal parlance means here tuition fees means total fees paid minus any payment towards any development fees or donation or payment of similar nature. so admission fees is also allowed. In My Opinion Transport charges, hostel charges, Mess charges, library fees ,scooter/cycle/car stand charges is not allowed. Building fund or any donation etc not allowed.

Comparison / Tax planning: From the above its very clear that 80E is for repayment of Interest which can be claimed within 8 years. U/s 80C Deduction is for payment of tution fee for their children. It’s clearly evident that the benefit under section 80E is over and above the tax benefits under section 80C. So if you have utilized your limit under section 80C, this could be a further opportunity to reduce your tax outgo, provided you have to pay the loan fully within 8 years

(Author can be reached at subiin54@gmail.com)

Read Other Articles of CA Subhash Srinivasan

(Article Was First published on 20.03.2012)

Also Read-Section 80E- Education Loan– The Mantra to Save Tax

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0 responses to “Tax Planning under section 80C & 80E”

  1. Roni says:

    My salary is above 2 lakh but below 3 lakh. Can I apply under section 80E to get Tax benefit?

  2. Deep says:

    I will be paying Rs. 20000 as interest for education loanthis year and also Rs 3000 as house rent per month. How much tax benefit will I get?

  3. A K Sinha says:

    Dear Sir,

    I have booked a flat under construction in June 2010 (FY 2010-11)by taking loan from Bank. The Builder has delayed the project and it is expected to handover flat before March 2014 (Fy 2013-14. Please let me know whether, I can get Income Tax benefit with respect to Interest paid for FY 2010-11, 2011-12, 2012-13 & 2013-14 in the Assessment Year 2014-15.

  4. Arvind Maurya says:

    If anybody deduction on Salary then he income tax paid after that income tax deduction before tds what i calculate Then how to paid Income tax Include salary

  5. Rohit says:

    Respected Sir,

    I applied for educational loan in 2007 and withdrew money from bank semester-wise from 2007 to 2011.I did not pay any interest in this 4 years.2011-2012 was my moratorium period and I did not furnished any interest in 2011-2012 also.All the amount become an outstanding and my emi was told to me in march 2012. I started paying Rs.4260 emi from april 2012 onwards.

    I want to apply for tax exemption under 80E. can I pay all the accumulated interest on my loan (between year 2007-2011) in one shot in may 2012 (my bank is allowing me to do so) and get tax exemption on the total interest paid in the financial year 2012-2013?

    Please help .

  6. RAKESH KUMAR says:

    respected sir,
    I, RAKESH KUMAR, WOULD LIKE TO SAY THAT, I HAVE TAKEN EDUCATION LOAN(3.5 LACS) FROM PUNJAB NATIONAL BANK FOR PGDM TO SESSION OF 2009-2011. WHAT AM I ELEGIBLE FOR DEDUCTED THE INTETEST RATE.

  7. subash says:

    a) “Approved charitable institution” means an institution specified in, or, as the case may be, an institution established for charitable purposes and notified by the Central Government 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;

    Reading the below prov as per Banking regulation act not less than forty per cent. of the paid- up capital is held (whether singly or taken together) by the Central Government or the Reserve Bank or a corporation owned by that bank”

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