Section 80E: Deduction for Interest on Education Loan

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By Hiral Vakil on March 7, 2019
Income TaxTax Savings & DeductionsChapter VI-A

What is deduction u/s 80E?

Section 80E allows a deduction for interest paid on repayment of education loan taken for higher education. However, a taxpayer can not claim a deduction on principal repayment. You can claim this income tax deduction while filing your ITR.

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

Only individuals are eligible to claim deduction under section 80E. Hindu Undivided Family (HUF) or company or partnership firm can not claim deduction under this section. Following are the additional conditions to claim the deduction:

  • A loan must be taken from financial institutions or charitable institutes. The loan taken from relatives or friends is not eligible for deduction.
  • The loan must be taken for the purpose of pursuing higher education for self or for a relative. Relative includes spouse, children, and student for whom an individual is a legal guardian.
  • The repayment must be done by the taxpayer
Deduction can be claimed even if a loan is taken to pursue higher studies outside India.

What is the deduction limit u/s Section 80E?

There is no monetary limit u/s 80E. An individual can claim the total interest amount paid as a deduction. However, a deduction is available only for 8 consecutive years. For example, Arjun has taken an education loan for his higher education in FY 2016-17. He has repaid the loan in 3 years then he can claim a deduction for 3 years only.

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FAQs:

1. Can I claim deduction u/s 80E for loan taken from relative or friend?

No. In case you have borrowed money from a relative or a friend, you would not be able to claim deduction under section 80E.

2. Can I claim deduction u/s 80E if my father has paid the loan?

No, you can not claim deduction u/s 80E. However, your father can claim a deduction u/s 80E. Because relative includes children of an individual.

3. What does higher education mean under section 80E?

Higher education includes all the fields of study pursued after passing the senior secondary examination or its equivalent exam. It includes vocational as well as regular courses.