Section 80E of income tax act is a tax-saving provision that provides tax deductions to individuals who have taken education loans to pursue their higher studies. Hence, 80E Deduction comes with the dual benefit of helping you pay for your education while also saving you money on taxes. However, it is important to note that the deduction is available only on the interest portion of the loan and not on the principal amount of the loan.
What is Section 80E of Income Tax Act?
Section 80E allows a deduction for interest paid on repayment of education loans taken for higher education. However, a taxpayer can not claim a deduction on principal repayment.
Note: If the taxpayers opt for the new tax regime, they cannot claim interest on the education loan deduction.
Eligibility Criteria to Claim 80E Deduction
Only individuals can claim the 80E deduction. Hence, HUF, a company, or a partnership firm can not claim a deduction under this section.
The following are the additional conditions to claim the deduction:
- A loan must be taken from financial institutions or charitable institutes. Hence, the loan taken from relatives or friends is not eligible for deduction
- The purpose of the loan is for pursuing higher education for self or for a relative. Relative includes spouse, children, and student for whom an individual is a legal guardian.
- The loan should be taken under the name of the taxpayer.
- Moreover, the repayment of the education loan must be done by the taxpayer.
Section 80E Deduction Limit and Timeframe of Deduction
There is no monetary limit u/s 80E. An individual can claim the total interest amount paid as a deduction. However, it is important to note that, a deduction is available only for 8 consecutive years. The deduction for the interest on the loan begins from the year in which the individual starts repaying the loan.
For example, Arjun has taken an education loan for his higher education in FY 2016-17 and the interest payable per annum is INR 1 lakh. Arjun manages to repay the loan in 5 years so he is eligible to claim an 80E deduction on the interest repayment of INR 1 lakh for those 5 years.
ITR Form Applicable
The taxpayer can claim deductions u/s 80E while filing ITR by fulfilling the above conditions. Individuals can claim this deduction in any of the ITR forms, i.e, ITR 1, ITR 2, ITR 3, and ITR 4 depending upon their income sources.
Documents Required for 80E
- Loan Certificate from your bank or financial institution or approved charitable institution
No. In case you have borrowed money from a relative or a friend, you will not be able to claim a deduction under this section.
No, you can not claim 80E Deduction. However, since your father has paid for your education loan and the definition of relative includes the children of an individual, your father is eligible to claim this deduction while filing his ITR subject to the loan being in your father’s name.
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.
No, deduction under section 80E of Income Tax Act can only be claimed if the loan is taken from a financial or charitable institution.
No, Section 80E deals with tax deductions on the interest component of loan repayment. You can claim the tuition fee expense u/s 80C.