Tax Benefit on Education Loan - Section 80E
With rising cost of professional courses and increasing acceptance of loans, Education loan has become quite popular among students and their parents. Other than giving an opportunity for better education, it also gives you tax deduction under sec 80E of Indian Income Tax Act once you start earning.
This post covers all the questions you might have regarding tax benefit on education loan.
As for any EMI, the EMI that you pay for education loan has two components – interest and principal. The tax benefit on education loan is available only on the interest component. You are eligible to deduct the entire interest paid (without any limit unlike in case of Housing loan) in the financial year from your income of that year. There is no deduction on principal paid for Education Loan.
Below is an example:
Suppose you have an education loan of Rs 5 Lakh at 11% interest rate per annum. Your repayment tenure is 5 years. So your EMI would be Rs 10,871.
Following is the breakup of your payment for 5 years and the tax benefit you can get:
Download: Tax Planning Guide for FY 2018-19
| Year | Total EMI | Principal | Interest | Tax Benefit* |
| 1 | 1,30,455 | 79,378 | 51,077 | 10,420 |
| 2 | 1,30,455 | 88,563 | 41,892 | 8,546 |
| 3 | 1,30,455 | 98,812 | 31,643 | 6,455 |
| 4 | 1,30,455 | 1,10,246 | 20,209 | 4,123 |
| 5 | 1,30,455 | 1,23,003 | 7,452 | 1,520 |
* Assuming you are in 20% tax bracket.
Anyone who has taken education loan for self, spouse or children, is eligible to claim tax deduction.
As per the Income tax rules, the education loan should be for regular or professional courses pursued after passing the senior secondary examination. The course should necessarily be full time.
You are eligible for tax deduction for above courses irrespective of it being pursued in India or abroad.
Education Loan Tax benefit is not is not available to HUF
The education loan should only be taken from approved charitable trust or a financial institution. In case you have taken loan from your relatives, friends or employer that amount would not qualify.
The deduction is applicable for the year you start paying your interest and seven more years immediately after the initial year. So in all you can claim education loan deduction for maximum eight years.
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View Comments
Sir, Please advise
Can we take the exemption of interest for self study during we do job and take higher study with correspondence.
Tax on Education loan is only applicable for full-time courses.
What documents are required to be submitted in support of the education loan interest payment?
Can I use the e-Bank Statement ? I am using INB to pay the EMI.
Hi,
Can we also avail loans for part time courses ?
Is a working professional eligible for education loan ?
Regards,
Vikas
You can get loan but not tax benefit on loans for part time courses!
i have a doubt.
Higher education means any course of study pursued after passing the Senior Secondary Examination or its equivalent from any school, board or university recognised by the Central Government or State Government or local authority or by any other authority authorised by the Central Government or State Government or local authority to do.
to claim deduction the course has to be authorized by central or state govt but you said that the loan taken could be utilized for course in India or ABROAD?????
please clarify me on this...
As per Income Tax website - "higher education" means any course of study pursued after passing the Senior Secondary Examination or its equivalent from any school, board or university recognized by the Central Government or State Government or local authority or by any other authority authorized by the Central Government or State Government or local authority to do so;
There are several courses abroad which are authorized by Indian Govt. For e.g. if you do graduate from US you are considered equivalent to graduate in India. So recognition here refers to the above instances.