A penny saved is a penny earned.  Likewise, saving taxes means saving of our money.

As per Income Tax Act, when an individual avails loan for education purpose, then deduction under Section 80E can be claimed. Various forms of higher studies (including vocational courses) are covered under this section for claiming deduction.

The Deduction allowed under Section 80E of Chapter VI-A is only for repayment of Interest on Education Loan and not for the purpose of Repayment of Principal amount of Education Loan.

Eligibility Criteria

To claim the deduction under Section 80E of Chapter VI-A, below mentioned points should be satisfied:-

1. The person should be Individual Tax payer. This deduction is not applicable to the HUF (Hindu Undivided Family).
2. This deduction determines the Interest that the individual pays on the loan taken.
3. The loan should be taken from a financial Institution or an Approved Charitable Institute.
4. The educational loan is taken for higher education for self, spouse, children.

Major Purposes of Education Loan

As per Section 80E of Income Tax Act, 1961, deduction is allowed, when an individual sources a loan for the purpose of Higher Education of self, Spouse or Children or students of whom the individual is the legal guardian.

Duration of Deduction

The deduction under Section 80E can be claimed in the year when the individual begins to repay the interest amount on education loan. Thus, the deduction is available for a maximum period of 8 years or until the amount of Interest is repaid by the individual in full (whichever is earlier).

Things to be noted prior Tax Deduction through Education Loan

 Here are some terms that an individual should be aware while referring to Section 80E-

• “Higher Education”, as per the aforesaid Section 80E, it is study course pursued by the individual after clearing Senior Secondary Examinations (i.e. Class 12th Examination).

 

• “Financial Institution”, refers to any bank to which the Banking Regulation, Act 1949 does apply which includes a bank or banking institution which is referred to in section 51 of the Act.

 

• “Approved Charitable Institution” refers to an institution established for the purpose of charity as well as approved by the concerned authority under Section 10 of the Act.

 

The Income Tax Act, 1961 have introduced the Education Loan scheme so as to provide support and assistance to the individuals.

 

Visit us at Taxmantra.com-ITR filing, for query, support and feedback.