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Section 80E : Deduction for Interest on Education Loan

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Hiral Vakil

Chapter VI-A
Interest
Section 80E
Last updated on July 19th, 2021

What is Deduction under section 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.

Deduction under section 80E is not allowed for Financial Year 2020-21 if the taxpayer opts for the new tax regime
Tip
Deduction under section 80E is not allowed for Financial Year 2020-21 if the taxpayer opts for the new tax regime

Who is Eligible to Claim Deduction for Education Loan Under Section 80E?

Deduction under the section can be claimed by individuals only. This deduction can be claimed even if a loan is taken to pursue higher studies outside India. HUF or company or partnership firm can not claim deduction under this section. Following are the additional conditions to claim the deduction:

What is the Education Loan Deduction Limit Under Section 80E?

There is no monetary limit u/s 80E. An individual can claim the total interest amount paid as a deduction. One has to note that, 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 and the interest payable per annum is INR 1,00,000. Arjun manages to repay the loan in 5 years so he is eligible to claim deduction u/s 80E on the interest repayment of INR 1,00,000 for those 5 years.

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ITR Form Applicable for Section 80E

The taxpayer can claim this deduction while filing ITR if all the above-mentioned conditions are full-filled. Individuals/HUFs can claim 80E in any of the ITR forms, i.e, ITR 1ITR 2ITR 3 and ITR 4 depending upon their income sources. The due date for filing ITR is 31st July of the next FY if the tax audit is not applicable.

Supporting Documents

The only document that is required in this case apart from the common documents such as Form 16, PAN etc. is a certificate from your bank or financial institution or approved charitable institution from whom such an education loan has been taken.

FAQs

Can I claim deduction u/s 80E for an education 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 this section.

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.

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.

For my daughter’s further education in the United States, I took an employee educational loan from the company that I am employeed at. Can I claim a deduction under section 80E?

No, deduction under section 80E of Income Tax Act can only be claimed if the loan is taken from a financial or charitable institution.

My father took a loan for my higher education 2 years ago and claimed deduction u/s 80E, now I have finished studying and started earning. Can I now claim a deduction u/s 80E instead of my father?

Yes, one can claim deduction u/s 80E as long as one is repaying the EMI on the loan taken.

Got Questions? Ask Away!

  1. Hey @sushil_verma

    There are a wide range of deductions that you can claim. Apart from Section 80C tax deductions, you could claim deductions up to INR 25,000 (INR 50,000 for Senior Citizens) buying Mediclaim u/s 80D. You can claim a deduction of INR 50,000 on home loan interest under Section 80EE.

  2. Hey @Dia_malhotra , there are many deductions that you can avail of. Your salary package may include different allowances like House Rent Allowance (HRA), conveyance, transport allowance, medical reimbursement, etc. Additionally, some of these allowances are exempt up to a certain limit under section 10 of the Income Tax Act.

    For eg,

    • Medical allowance is exempt up to INR 15,000 on a reimbursement basis.
    • Children education allowance is exempt up to Rs. 200 per child per month up to a maximum of two children.
    • Conveyance allowance is exempt up to a maximum of Rs. 1600 per month.

    Tax on employment and entertainment allowance will also be allowed as a deduction from the salary income. Employment tax is deducted from your salary by your employer and then it is deposited to the state government.

  3. The benefit Section 80EEB can be claimed by individuals only. An individual taxpayer can claim interest on loan of an electric vehicle of up to INR 1.5 lacs u/s 80EEB. However, if the electric vehicle is used for the purpose of business, the vehicle should be reported as an asset, loan should be reported as a liability and the interest on loan can be claimed as a business expense irrespective of the amount. (We have updated the article with the changes).

    Thus, if you have a proprietorship business, you should claim interest amount as a business expense only if the vehicle is used for business purpose. However, if it is used for personal purpose, you can claim deduction of interest u/s 80EEB in your ITR since you would be reporting both personal and business income in the ITR (under your PAN).

    As per the Income Tax Act, the deduction under Section 80EEB is applicable from 1st April 2020 i.e. FY 2020-21.

  4. Hey @Sharath_thomas , we have updated the content according to the appropriate assessment year. Thanks for the feedback. :slight_smile:

  5. Hey @shindeonkar95

    In case of capital gain income (LTCG/STCG), transfer expenses are allowed as deduction, except STT.

    However, in case of business income (F&O, intraday), all expenses incurred for the business (including STT) are eligible to claim deduction in ITR.

    Hope, it helps!

  6. Hello,

    Is it possible to claim deductions under S. 80CCF for Infra bonds bought in the secondary market and held to maturity?

    There were a number of 10 year infra bonds issued in the 2010- 2013 period, which will start maturing soon. These are all listed on the exchanges (although hardly any liquidity or transactions in them). If I were to buy some of these bonds in the open markets and hold them in my demat to maturity (<3 years), is it possible to claim tax deductions (upto 20k per year) under 80CCF for buying?

    I couldn’t find anything on this. Any help is appreciated.

  7. Hello @Veejayy,

    Yes you can claim deduction under 80CCF for investment made in specified infrastructure and other tax saving bonds bought in the secondary market and held to maturity.

    Deduction under Section 80CCF can be availed only through investment in certain tax saving bonds, issued by banks or corporations after gaining permission from the government which shall be restricted upto 10,000 per year.

    These bonds are generally long term bonds, having tenure of more than 5 years with a lock in period of 5 years in most of the cases. These bonds can be sold after the lock in period!

    Also, interest earned on these bonds will be taxable.

    Hope this helps!

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