Mundle Venkatraman & Associates

80E : Deduction on Payment of Interest on Education loan

By: Mr. Vipul J Oza - 8th March, 2021

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Nowadays, anyone can pursue higher education in any accredited institution; all you really need is talent and a determination to succeed.

The parents bear the cost of education so that their child may have a better future. And this cost of education is becoming more and more expensive in the modern world. Therefore, many students who want to pursue higher education in qualified universities are not be able to do so because of financial constraints.

The Government has always worked to promote education and has always tried to assist the students and their parents. Fees paid for schools and colleges are eligible for a deduction u/s 80C. For those students who avail of loans for higher education are able to save on taxes by claiming the interest paid as a deduction u/s 80E

What is Deduction 80E under Chapter VI A

Section 80E provides a deduction to an individual assessee in respect of any interest on loan taken for meeting higher education expenses paid by him in the previous year out of his income chargeable to tax.

Who is eligible to claim deduction u/s 80E?

The deduction is available only to individuals.

Is there any ceiling on the maximum amount to be claimed under 80E?

There is no maximum limit on the amount that can be claimed for the deduction.

How many years are we eligible to claim the deduction?

Interest on education loan is deductible for 8 years or till repayment whichever is earlier. (For example, if you have completed repayment of the loan within 3 years, then you can claim a deduction of up to 3 years). If your tenure exceeds 8 years, you will not be able to claim the deduction beyond the 8^th year.

Can loan taken from a relative or employer will be considered as deduction?

No, interest paid on loans taken from a relative or employer are not eligible for deduction u/s 80E because the Income Tax Act, 1961 specifically states that the education loan should be taken from a recognized financial institution only.

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