April 2018 is the beginning of the new financial year (FY 2018-19) in India. We have been conducting several sessions for employees on the tax changes for the new year & one question that we have often been asked is “How do I save tax?”. We shall answer this question in a comprehensive way in a series of articles that will be published on our website. Stay tuned to know more!
Can an education loan help you save taxes? Yes! It can! In this week’s bulletin we shall look at Sec. 80E – Deduction in respect of interest on loan taken for higher education, which provides a deduction for interest paid on education loans.
Here are top 7 things you need to know about 80E
- Interest paid on an education loan taken for the purpose of higher studies qualifies for deduction u/s 80E. No benefit is available for the principal repaid.
- Till the financial year 2007-08, the benefit u/s 80E was available only for loans taken by the taxpayer on his / her own higher education. However, from 01-Apr-2008, the benefit has been extended to loans taken for higher education of the taxpayer’s spouse or his / her children as well.
- The education loan should be taken from a financial institution or from an approved charitable trust. Loans taken from any other persons (friends / relatives) will not qualify for deduction u/s 80E
- Higher education has been defined to mean any education after passing the Senior Secondary Examination. The education could be full time / regular course or otherwise.
- Unlike 80C for tuition fee, there is no condition that the education should be from a school in India. Higher education could be from an institution in India or outside India.
- The benefit u/s 80E is available for 8 years in total, starting from the year in which the taxpayer first starts paying interest & 7 consecutive years hence (or the year upto which the loan is repaid in total, whichever is earlier).
- There is no maximum limit upto which deduction u/s 80E can be claimed. The entire amount paid towards interest can be claimed as a deduction.
We have often seen that taxpayers forget to claim benefit u/s 80E though they are eligible for it. This is especially true when the loan is taken for the purpose of children’s higher education. The only document needed to claim the benefit u/s 80E would be the bank’s certificate which quantifies the amount of interest paid. We would urge you to avail benefit of u/s 80E as it does not come with any upper limit.
If you have any further questions on 80E, please do not hesitate to reach out to us on pavan@bclindia.in. We would be glad to be of your help.
Index of other articles in this series (click on the title to go to the article)
- The fine print of 80C
- All about NPS!
- Tax benefits on education loans.
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