Section 80E of the Income Tax Act 1961

Section 80E of the Income Tax Act

Section 80E of the Income Tax Act, 1961; deals with the deduction of income tax regarding interest on loan taken for higher education. If you have taken education loan and paying the interest, then you can claim such interest as the deduction from the total income U/S 80E. However, you can claim the deduction only for the interest and not for the principal amount. The loan includes tuition or college fees; as well as other incidental expenses for pursuing such studies like hostel charges, transport charges, etc.

Section 80E of the Income Tax Act

Section 80E of the Income Tax Act

Conditions for claiming deduction U/S 80E

  • Only an individual can claim the deduction U/S 80E and not HUF or any other taxpayer.
  • The taxpayer must have taken loan for higher education of self, spouse or children; or the student for whom he/she is a legal guardian. Thus, parents are also eligible to claim the deduction of interest paid by them on loan taken for their children’s education.
  • An assessee must have taken loan in his name.
  • The taxpayer should have taken from any bank or financial institution or any approved charitable institutions. Thus, you cannot claim interest on loan taken for and from friends or relatives as deduction.
  • An assessee cannot claim the interest on a loan received from any financial institution outside India as the deduction.

Note: Higher Studies means any regular course sought after passing the senior secondary exam; or its equivalent from any school, board or university approved by the central government or state government or local authority. The deduction is also extended to vocational courses and any education loan taken after 1st April 2009. The deduction is permitted for courses pursued in India as well as outside India.

The limit of deduction under this section is over and above the limit of Rs. 150000, which is provided U/S 80C. There is no limit for claiming deduction under this section.

An assessee can claim the deduction in the year in which he/she starts paying the interest on education loan and in 7 succeeding years. This means the deduction is available for a maximum period of 8 years or until the assessee repay the interest in full; whichever is earlier. An assessee cannot claim the deduction if the loan tenure exceeds 8 years.

Important Points

In computing the total income of the taxpayer; being an individual, there shall be deducted; in accordance with the subject to the provisions of this section; any amount paid by him in the PY, out of his income liable to tax; by way of interest on loan taken by him from any financial institute or any authorized charitable institution for the purpose of seeking his higher education.

For the purposes of this section,

  • Approved charitable institution means an institution defined in, or, as the case may be, an institution established for charitable purposes; and notified by the central government U/S 10 (23)(C), or an institution mentioned in section 80G (2)(a).
  • Financial institution implies a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies including any bank or banking institution mentioned in section 51 of that Act or any other financial organization which the central government may, by notification in the official Gazette, stipulate in this behalf.
  • Higher education indicates full-time studies for any graduate or post-graduate course in engineering, medicine, management or for the post-graduate course in applied sciences or pure sciences including mathematics and statistics.Section 80E of the Income Tax Act

Section43B 

Section 44AD

 

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