Section 80E: Income Tax Deduction on Education loans

Last Updated at: November 28, 2019
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Section 80E Income Tax Benefits on Education loans

Education is more important to an individual. What if money is a constraint for you to get education officially? Isn’t applying for educational loans a good idea? Let’s get to it in this blog.

The cost of education has an enormous rise in the country. Moreover, education is a field where everyone has to spend. However, Section 80E of the Income Tax helps students in a prominent way. The section provisions to educational loans. If you want to pursue higher studies either in India or abroad, then you can avail the education loan.

Foreign Universities provide a more substantial fee structure when compared to India. Moreover, you will have to consider not only the basic tuition fee but also the travel expenses, residency, mandatory study materials such as laptop, smartphone, etc. Therefore, the initiation of Section 80E to the Income Tax Act is a great relief to the taxpayers. It comforts the taxpayers who lack high education expenses and also the rising loan interest.

E-file Your Income Tax Returns

What is Section 80E?

Section 80E covers education loans taken up on behalf of one’s spouse, biological children or children to whom one is a legal guardian. These instances are applicable for deduction under Section 80E. Another important element which is required in order to make sure that the loan is eligible under Section 80E is that the loan must be taken from a financial or charitable institution.

Therefore, if the loan that is being claimed under the said section is taken from your employer or a close relative, then the interest accumulated will not be covered under the scope of Section 80E.

Who can apply for a deduction under Section 80E

One must consider that in order to avail the deduction under Section 80E, the applicant will have to be an individual and not a legal personality. For instance, a loan taken under the name of a HUF, a company or a firm, is not entitled to be reimbursed under Section 80E. These are some of the basic eligibility criteria to apply for a deduction under Section 80E.

  • Only individuals are eligible for tax deductions, Hindu Undivided Families (HUF) and companies cannot avail deductions under this section. Also, if your friends or relatives grant you loan, then it is not eligible under this section.
  • Income Tax Deduction can be claimed only on the interest component.
  • The parent, as well as the child, can claim for the benefit. It means that the person who pays the education loan whether parent or child can start claiming this deduction.
  • If you take the loan to finance higher education, then the deduction is applicable.
  • The deduction is only for 8 years. You cannot claim for deductions beyond 8 years. The deduction can be availed only if the loan is taken under the name of a person liable to pay taxes.

Why claim under Section 80E?

The benefit available under Section 80E is that any individual who has applied for a loan for higher education can avail the benefits of tax saving provided by Section 80E of the Income Tax Act, 1961. Even if an individual has availed the maximum available deduction of INR. 1,50,000 under section 80C, they can still avail deduction under Section 80E. There is a thin line of difference between the operative areas of Section 80C and 80E. The former provides for deduction in respect to tuition fees paid for education, while the latter is a deduction for the interest on loan taken for higher education.

How to claim under Section 80E for education loans? 

The deduction available under Section 80E pertains to the interest paid on the loan taken for higher studies. The lucrative point of attraction to this scheme is that it has no upper limit; the only point is that it does not cover the principal amount under its deduction but rather the entire amount of interest paid. The amount of range is not a determinant for claims under the said section. The type of course doesn’t matter and hence it can be a regular or a vocation course, pursued inside or outside India.

Section 80E: Income Tax Deduction on Education loans

1316

Education is more important to an individual. What if money is a constraint for you to get education officially? Isn’t applying for educational loans a good idea? Let’s get to it in this blog.

The cost of education has an enormous rise in the country. Moreover, education is a field where everyone has to spend. However, Section 80E of the Income Tax helps students in a prominent way. The section provisions to educational loans. If you want to pursue higher studies either in India or abroad, then you can avail the education loan.

Foreign Universities provide a more substantial fee structure when compared to India. Moreover, you will have to consider not only the basic tuition fee but also the travel expenses, residency, mandatory study materials such as laptop, smartphone, etc. Therefore, the initiation of Section 80E to the Income Tax Act is a great relief to the taxpayers. It comforts the taxpayers who lack high education expenses and also the rising loan interest.

E-file Your Income Tax Returns

What is Section 80E?

Section 80E covers education loans taken up on behalf of one’s spouse, biological children or children to whom one is a legal guardian. These instances are applicable for deduction under Section 80E. Another important element which is required in order to make sure that the loan is eligible under Section 80E is that the loan must be taken from a financial or charitable institution.

Therefore, if the loan that is being claimed under the said section is taken from your employer or a close relative, then the interest accumulated will not be covered under the scope of Section 80E.

Who can apply for a deduction under Section 80E

One must consider that in order to avail the deduction under Section 80E, the applicant will have to be an individual and not a legal personality. For instance, a loan taken under the name of a HUF, a company or a firm, is not entitled to be reimbursed under Section 80E. These are some of the basic eligibility criteria to apply for a deduction under Section 80E.

  • Only individuals are eligible for tax deductions, Hindu Undivided Families (HUF) and companies cannot avail deductions under this section. Also, if your friends or relatives grant you loan, then it is not eligible under this section.
  • Income Tax Deduction can be claimed only on the interest component.
  • The parent, as well as the child, can claim for the benefit. It means that the person who pays the education loan whether parent or child can start claiming this deduction.
  • If you take the loan to finance higher education, then the deduction is applicable.
  • The deduction is only for 8 years. You cannot claim for deductions beyond 8 years. The deduction can be availed only if the loan is taken under the name of a person liable to pay taxes.

Why claim under Section 80E?

The benefit available under Section 80E is that any individual who has applied for a loan for higher education can avail the benefits of tax saving provided by Section 80E of the Income Tax Act, 1961. Even if an individual has availed the maximum available deduction of INR. 1,50,000 under section 80C, they can still avail deduction under Section 80E. There is a thin line of difference between the operative areas of Section 80C and 80E. The former provides for deduction in respect to tuition fees paid for education, while the latter is a deduction for the interest on loan taken for higher education.

How to claim under Section 80E for education loans? 

The deduction available under Section 80E pertains to the interest paid on the loan taken for higher studies. The lucrative point of attraction to this scheme is that it has no upper limit; the only point is that it does not cover the principal amount under its deduction but rather the entire amount of interest paid. The amount of range is not a determinant for claims under the said section. The type of course doesn’t matter and hence it can be a regular or a vocation course, pursued inside or outside India.

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