Section 80E – Income Tax Deduction for Education Loan

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Education Loan is a popular type of loan that helps to finance higher studies and at the same time, it can also save a lot of tax. Education loan includes loan taken for higher education including tuition fees for the course, expenses towards travel, lodging and other expenses towards study material as well. Here’s an overview of deduction for repayment of Interest on education loan.

Who can Claim Deduction?
Deduction under Section 80E of Income Tax Act can be claimed for loans taken by:
  • For self
  • Spouse
  • Children of assessee including adopted children
  • For student of whom assessee is the legal guardian
The deduction can be claimed by individual who has availed the loan and is responsible for repaying the same out of his income.

education loan


What is the Deduction Amount that can be claimed under Section 80E?
The deduction amount that can be claimed under Section 80E is equal to the interest amount paid of loan taken for higher education. There’s no upper limit for the deduction to be claimed. Also, deduction is available irrespective of the rate of interest at which the loan is availed. The most attractive part of this section is that there’s no upper limit of amount of interest that can be claimed as deduction.

What is the Deduction Period of Section 80E?
Deduction shall be allowed in computing total income in respect of initial assessment year and seven assessment years immediately succeeding the initial assessment year or until the interest is paid by assessee, whichever is earlier. This can be better understood with the help of an example:

Example
Mr. Raj has taken a loan for higher education in the year 2010-2011 and has started paying interest in the same year. Thus, he can claim deduction for payment of interest from assessment year 2011-12. This 2011-2012 would be called initial assessment year. And, Mr. Raj can thereafter claim deduction for interest on loan for seven more years, i.e. till AY 2018-2019.

Can 80E Deduction be claimed in addition to other Sections?
Yes, deduction under Section 80E is available over and above deductions under other sections covered under Chapter VI A of Income Tax Act. For example, Rs. 150000 deduction under Section 80C has already been claimed by the assessee, and then also he can avail deduction under Section 80E.

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