Section 80e: Income Tax Benefits for Cost of Education

With the proliferation of new career opportunities, getting the right professional skills has become immensely important over the years. However, the average Indian family may find it difficult to afford higher education for its children.Education loans offered by leading financial institutions help bridge any financial shortfall enabling young Indians to fulfil their career aspirations. They have even put expensive courses at foreign universities within easy reach.Availing an education loan makes a taxpayer eligible for tax deductions under Section 80E of the Income Tax Act , which pertains to defraying the cost of higher education in India. The rebate applies only in respect of interest paid on EMIs.

• Legal guardians or sponsors of students desirous of going for higher education can also claim tax relief on education loans taken by them. You do not have to be biologically related to the student to claim this benefit.
• Only loans taken from recognised public or private financial institutions qualify for tax benefit. Soft loans from friends and family are not eligible.
• This rebate is only available for individuals. Corporate or charitable organisations do not come under the purview of Section 80E.
• It is only applicable to loans taken for the purpose of higher education, whether in India or overseas.
• An essential condition is that only the person taking the loan is eligible to receive tax benefits. Beneficiaries of the loan do not get additional deductions.
• Any Indian national who takes an education loan on behalf of his/her spouse, children, extended family, etc can claim rebate, as per the provisions of Section 80E.

The amount of tax rebate depends on the total interest paid on EMIs during the year. An interest certificate issued by the lending bank is required, clearly showing the annual interest component of the loan.This benefit is available for a fixed term of 8 years from the start of the repayment period or until it is paid off, whichever is earlier. If the loan is foreclosed, the rebate will not be applicable for the rest of the period. On the other hand, if the loan tenure is extended beyond 8 years, tax benefit will be rescinded.There is no upper limit to the amount of tax benefit that an individual can obtain, under this section.

A taxpayer can claim tax benefit under Section 80E for the interest component of an education loan and tuition fees under Section 80C, provided the educational institution in question is located in India. This dual benefit can help taxpayers discharge their tax liability to a significant extent.However, as with tax deductions on tuition fees, Section 80E does not permit discounts on education loans taken for part-time courses.Ultimately, saving tax on higher education expenses is gratifying for parents or guardians seeking higher education for their children.Ready to make the most of your money? Start your tax planning journey now!

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.