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Section 80 E of the Income Tax Act:

(Deduction for Education Loan)

education loan
Deduction in respect of interest on Loan taken for Higher Education-

Higher education funded with loan can bring some tax benefits too. Subject to certain conditions an education loan may entilte you a deduction u/s 80E for the interest part of loan, if taken for own higher education or for higher education of a relative. An indepth analysis of Section 80E brings out  following points that need to be clearly understood:

  1. Loan must be in your name, may be taken for your child or spouse but shall be in your name.

  2. Deduction is available for the payment of interest on loan taken for higher education.

  3. Amount of Deduction: There is no limit for amount deductible, any amount paid out of taxable income during the previous year as interest on education loan will be eligible for deduction U/s 80E.
  1. What is allowed as Deduction? Deduction is limited only to interest payment part, no deduction is available for principal repayment of loan.
  1. Deduction will be available on loan taken for higher education of self, spouse, children or an student for whom the individual is a legal guardian. No deduction for dependent brother or sister is available
  1. Time Period: Deduction will be allowed for Eight (8) consecutive years or untill the year the interest is paid in full; whichever is earlier ie. the previous year in which the payment of interest on loan started and seven years immediately succeeding the year in which interest payment started or untill the year the interest is paid in full; whichever is earlier.
  1. To be eligible for deduction, loan shall be for higher education. Higher education means any course of study undertaken with any board, school or university after passing senior secondary examination(class 12th).
  1. Higher education includes regular courses as well as vocational educational courses. Higher education may be persuaded in India or abroad.
  1. Loan for higher education must be taken from a financial institution or an approved charitable institution. Loan from relative or from any other source is not eligible for the benefit of section 80E.

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