Under India’s income tax law, deductions are allowed on interest payments of education loans under the provisions of Section 80E. This guide will elaborate on the various aspects of this section and its benefits.
Section 80E: Eligibility
Borrower type: Only individuals can avail of the benefits. Section 80E does not apply to Hindu Undivided Families (HUF) or companies.
Loan type: Education loan
Loan purpose: Benefits are allowed to those pursuing higher studies – including vocational and regular courses – in India or abroad. Higher studies include studies undertaken after passing the senior secondary exam of 12th standard.
Applicability on loan component: Section 80E enables deductions against education loan interest payments. No deduction is allowed against payment of the principal component.
Loan source: The loan must be taken from a bank, financial institution or an approved charitable institution, for the borrower to claim Section 80E deduction. Loans taken from family or friends do not qualify for deduction under Section 80E.
Deduction limit: The entire interest paid during the year can be claimed as a deduction, since Section 80E does not impose any cap on the deduction limit.
Also read all about Section 80C deduction
Borrower type: Deductions under Section 80E can be claimed, even if the education loan is for your spouse or children. Legal guardians can claim the deduction.
know about: Section 80EE
Period for which deduction can be claimed: The deduction can be claimed for eight years or till the interest is repaid, whichever is earlier. This means, a deduction under Section 80E can be claimed only for eight years even if you continue to pay the interest for longer.
Interest certificate: An interest certificate must be submitted, stating the principal and interest payments during a year to claim the deduction.
all about: Section 80EEB of Income Tax Act
FAQs
What documents are required to claim Section 80E deduction?
An interest certificate from the bank is required to claim Section 80E deduction.
For how long can you claim Section 80E deductions?
Section 80E deduction can be claimed at the start of the education loan repayment cycle. The deduction can, however, be availed of only for eight years from the year when repayment starts or till the interest is fully paid, whichever is earlier.
