Save Tax through Educational Loan – 80E

Substantial tax saving is possible even if one has taken a loan for higher education. Due to financial constraints most of the persons are not able to pursue their higher studies, but now one can easily get financial assistance from Banks and other financial institution to pursue higher education. In order to encourage loan for higher studies, the government has provided deduction u/s 80E and have enhanced the limit of this deduction. Here are the provisions of this deduction: Who can claim? Deduction is available only to Individual & not to HUF or other type of Assessee. Loan taken from The Loan should be taken from any financial institution (i.e., a banking company or notified financial institution) or an approved charitable institution. Purpose of Loan The loan should be taken for the purpose of pursuing higher education, which includes following:

  • Full-time studies for any graduate or post-graduate course in Engineering (including technology /architecture), Medicine, Management or
  • Post graduate course in any university in applied sciences or pure sciences including mathematics and statistics.
  • All fields of studies (including vocational studies) pursued after passing the Senior Secondary Examination or its equivalent from any school, Board or University recognised by the Central or State Government or local authority. (Income Tax Act has extended this scope from Assessment year 2010-11).
  • No deduction is available for part-time courses.

Loan taken for the education of The Loan should be taken for pursuing own higher education or of relatives, i.e., spouse or any child or for the student for whom the individual or assessee is the legal guardian. Moreover, the course need not be pursued in India. Loans for overseas courses are also permissible for deduction. Source of Re-payment Deduction is available only if Interest is paid during the previous year and is paid out of income chargeable to tax. In other words, if interest is paid from income not chargeable to tax than deduction will not available. Amount of Deduction Entire payment of interest is deductible. The deduction is available for a maximum of 8 years or till the interest is paid, whichever is earlier. Loan taken in name of Loan should be in the name of individual claiming deduction. No deduction can be claimed for loans in the name of parents, spouse or sibling; even if the loan was taken for your studies. provides full fledged comprehensive tax planning service wherein we suggest the best investment and tax saving plans, which would minimize your total tax on income.

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