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Income Tax Benefits Under Section 80E Save Income Tax

An education loan not only funds your higher studies but also help save tax. The interest paid on the education loan can be claimed as deduction, as per Section 80E of the Income Tax Act of India, 1961.

But to get the income tax benefits under Section 80E, you must take the education loan from any of the scheduled banks in India or below 2 Gazette Notified Financial Institutions as per the Income Tax Act of India, 1961:

  • Credila Financial Services Pvt. Ltd.
  • HDFC Ltd.

Please note that, this clearly means that you will NOT be able to claim income tax benefits under Section 80E, if you take education loan from any other financial services company.

Some Other Important Points Related to Income Tax Deductions Under Section 80E:

  • The income tax benefit can only be claimed on interest part of the loan. The principal part does not qualify for tax benefit.
  • However, the entire interest part of the loans repaid can be deducted while calculating your taxable income. There is no upper limit for grant of deduction in respect of interest on loan for higher education. Also, there is no upper limit of the rate of interest which will be allowed as a deduction.
  • 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.
  • Income tax deduction can be claimed by an individual only if the loan has been taken in his/her name.
  • This special deduction is also allowed even for education loan availed for study abroad.

Section 80E of the Income Tax Act, 1961 relates to deduction for the repayment of Interest on Education Loan.  Customers of Credila can avail Income Tax Deduction on interest paid on Education Loan taken from Credila. Either student or parent can claim this tax benefit. This enables families to reduce the overall cost of Education Loan. The tax deduction under section 80E is available to an individual if following conditions are satisfied:

  • Deduction amount: The repayment of Interest paid on Education Loan is eligible for deduction and moreover there is no cap on the amount to be deducted. The entire interest amount can be deducted from the taxable income.
  • Interest should have been paid on loan taken by student from eligible financial institution only
  • “Higher education” means any course of study pursued after passing the Senior Secondary Examination or its equivalent from any school, board or University recognized 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.
  • Education 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. Hence parents are also eligible to claim deduction of interest paid by them on loan taken for their children’s education.
  • This Deduction is allowed for courses pursued in India as well as for courses pursued outside India.

The above information is to provide you with just the basic understanding only. Please consult your tax advisor for specific tax related advice. Credila does NOT take any responsibility related to individual’s tax matters.

Section - 80E, Income-tax Act, 1961-2014
96 Deduction in respect of interest on loan taken for higher education

80E 1. In computing the total income of an assessee, being an individual, there shall be deducted, in accordance with and subject to the provisions of this section, any amount paid by him in the previous year, out of his income chargeable to tax, by way of interest on loan taken by him from any financial institution or any approved charitable institution for the purpose of pursuing his higher education 97[or for the purpose of higher education of his relative].

2. The deduction specified in sub-section (1) 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 referred to in sub-section (1) is paid by the assessee in full, whichever is earlier.

3. For the purposes of this section,

  • “approved charitable institution” means an institution specified in, or, as the case may be, an institution established for charitable purposes and98[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;
  • “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 Gazette99, specify in this behalf;
  • 1[“higher education” means any course of study 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 authorised by the Central Government or State Government or local authority to do so;]
  • “initial assessment year” means the assessment year relevant to the pre-vious year, in which the assessee starts paying the interest on the loan;]
  • 2[“relative”, in relation to an individual, means the spouse and children of that individual or the student for whom the individual is the legal guardian.]

Click Here  to Visit Government of India Income Tax Act Page:
Click Here  to View Credila’s The Gazette of India Notification:
Credila Financial Services is a Subsidiary of Housing Development Finance Corporation Limited (HDFC) . Housing Development Finance Corporation Limited is one of the leading financial services companies of India.
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