Procuring an education loan aids you in two ways: helps you finance your abroad studies and save you tax. If you have acquired a loan for funding your education, and are paying it off, then, the applied interest on that loan is allowed as tax deduction under Section 80E. You can enjoy the benefit of tax deduction only for the interest part of the EMI towards the education loan. There is absolutely zero tax benefit for the principal of the education loan EMI.

Crucial Conditions for Claiming Income Tax Deduction under Section 80E:


1. Who can claim an income tax deduction under Section 80E?

Individuals can exclusively enjoy tax deductions under Section 80E; HUFs and other types of taxpayers are excluded from Section 80E deduction. To qualify for enjoying the benefits of tax deduction under this section, an individual must procure the loan for the upper education of themselves, their child or spouse, or even for a student for whom that particular individual is a legal guardian. Fathers and mothers can avail tax deduction for the procured education loan for their children in a hassle-free way.

2. From where can we apply and procure the loan to enjoy the benefit of an income tax deduction?

The education loan can be obtained from any leading bank or any financial institution of your choice. You can also secure a loan from any permitted charitable institutions. However, note that loans or credit procured from relatives and friends does not qualify for gaining tax deduction under Section 80E.

3. The overall purpose and objective of the loan

As Section 80E only covers and is focused on education loans, the loan you procure should be occupied exclusively to pursue upper education. Well, the place and location of education institute do not matter; it can be in India or global. Note that all the streams of study post senior secondary exams or their equivalent examination are considered under "higher studies."

Both vocational and regular courses come under section 80E and individuals opting for these courses can enjoy tax deduction benefits.

4. Total deduction amount

Under Section 80E, the overall deduction that has been allocated is the total interest of the overall EMI that is paid in the fiscal year. Please note that there isn’t any limit on the maximum amount, which is allowed as the tax deduction. However, you will have to submit a certificate provided by your bank or financial institute from where you have procured your loan.

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DISCLAIMER

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.



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