Section 80E: Interest Deduction on Education Loan
Introduction about Section 80E:-
It is the charging section of interest on education loan taken by an individual for his or for his spouse or for his children’s higher studies. An individual can claim for deduction u/s 80E of the income tax act 1961 out of his total income chargeable to tax. An assessee is eligible to deduct the interest amount of education loan which is only taken for higher education. The benefit of deduction helps the asseessee in reducing the overall cost of the education loan.
Conditions for taking the benefit of deductions u/s 80E:-
The following situations must be fulfilled by the assessee if he/she wants to take the benefit of deductions :
I. Such deduction is only claimed by an individual. HUF & other types of assessee are not eligible to claim the deduction.
II. Interest on such educational loan is paid by assessee in the previous year. It is also necessary for an assessee that interest on such loan is paid from his total income income chargeable to tax.
III. The main purpose of loan taken is for higher education, whether it is for an individual or for his spouse or for his children. If an assessee adopts any child and the loan is taken for his/her higher education, then the interest on it is eligible to deduct by an assessee.
a. Here “Higher Education“ means the Education after passing the higher secondary examinations i.e. for graduate or post graduate courses from any board or university or any other local authority authorized by the state government or central government. If the course is for minimum 2 years, then the interest on loan taken for that course would be eligible to deduct.
IV. There is only interest amount is deductible by the assessee. He/she can not claim deduction for the principal amount of the loan.
V. Such benefit is available to the assessee only when, the loan is taken from any financial institutions or any approved charitable institutions. The loan taken from the relatives or friends is not be eligible for deduction u/s 80E.
a. Here financial institutions mean any bank or any banking company or any banking institutions established under section 51 of the banking regulation act, 1949. Other financial institutions are also eligible if it is notified by the central government in the official gazette.
b. Approved charitable institution means any institutions approved under section 10 (23c) or an institution which is referred in section 80G and also it is established for charitable purpose.
VI. The deduction is available from the year in which the payment is made till the end of such payment or seven succeeding assessment years whichever is earlier.
VII. If the loan is taken from outside India and interest is also paid outside India still such deduction is available to the assessee.
VIII. The benefit of deduction on education loan is available only when the loan is taken in the name of assessee. If your parents or your spouse has taken a loan for your studies then you are not eligible to deduct its interest from your total taxable income.