Section 80E covers interest on loan for higher studies in abroad

The Tribunal clarified that interest on loan for higher education shall be allowed as deduction under section 80E if higher education after completing his Secondary Education examination or its equivalent was pursued. In addition, such interest shall not be denied even if education institutions are outside India. Section 80E covers interest on loan for Higher studies in abroad. 

Case: Nitin Shantilal Muthiyan vs. Deputy Commissioner of Income Tax

Facts:

The assessee being an individual filed his return of income. The assessee claimed deduction under section 80E for interest expenditure on loan taken for higher education of his son in Washington, USA.

During the assessment proceedings, the AO disallowed the same. As per the AO, the said deduction was allowable only in case of Indian education institutions duly authorized in India.

The CIT (A) confirmed the order of AO. On this, assessee appealed to the Tribunal.

Held:

In the findings, Tribunal marked that AO has mentioned in the assessment order that the assessee’s son wass taking higher education (MS Electrical Engineering) in Washington, United States of America. Therefore, it was conclusive that assessee’s son was pursuing higher education.

The deduction under section 80E is available to an individual if following conditions are satisfied:

• Deduction available only to Individual
• Interest should have been paid on loan taken by him from any financial institution or any approved charitable institution for the purpose of pursuing his higher education
• The amount of interest paid is eligible for deduction
• Deduction available if Interest is been paid during the previous year and was paid out of income chargeable to tax
• Loan should have been taken for the purpose of pursuing higher studies of Individual , Spouse, Children of Individual or of the student of whom individual is legal Guardian
• Deduction shall be allowed in computing the total income in respect of the initial assessment year* and seven assessment years immediately succeeding the initial assessment year or until the interest is paid by the assessee in full, whichever is earlier
• There is no condition that the course should be in India.

Therefore, there is no such stipulation under section 80E that the education should be in India only. From the facts it was clear that son of the assessee was pursuing his higher education after completing his Secondary Education examination or its equivalent and the interest expenditure was not in dispute.

Thus, the assessee shall be entitled to get the benefit of deduction under section 80E. Section 80E covers interest on loan for Higher studies in abroad.

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