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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My son had drawn educational loan from JK bank in 2013-14 in four installments for B tech course of 4 years and was returning the money to the bank as and when available and finally liquidated the entire outstanding principal amount along with interest in 2019-20 while in service of a company. can he avail the benefit payment of interest for the financial year 2019-20. what i mean to say is that he has paid outstanding amount along with interest as on 31-03-2019 in the month of june 2019. Is he entitled for tax rebate on the interest which was outstanding on 31st march 2019 and tax charged in these three months (APRIL TO JUNE 2020) which stands paid in june 2019. please clarify.
My Wife took the education loan before my marriage, After marriage I have been paying the loan, Shall I claim the Tax benefit for my spouse education loan which was taken before my marriage?
Can I claim deduction of only interest amount for 5 years Btech course and principal amount my son will pay
Only person on whose name the loan is taken can claim the tax benefit. In case its a joint loan, either of borrower can claim.
Hello sir,. I am planning to take education loan for my son . My question is if I pay only interest amount from my account during the 5 yr b-tech course, and the principal amount my son will pay when he get job..then can I claim deduction of only interest amount of these 5 years???
Sir, I have paid Rs. 22000/- as a interest on education loan of my daughter. How this amount will be deducted from my income.
1. Is this amount to be deducted from total gross salary directly
2. Or this amount to be added with 1.5 lakh rebate means my total deductions under chapter VI will be Rs. 1,72,000
3. Please clarify with example
The education loan interest would be deducted under section 80E, which is in addition to 80C (1.5 lakh limit). So in your case the tax exemption under section VI would be 1,72,000.
I have one doubt.
I take Education loan 2013 but a I am not paying any priciple & interest, I am settled single payment Interest & principle in 2017-18 FY.
can I claim Interest?
Both riders must start the race for bets to face.
According to your calculations interest benefit mentioned is as below
Year Total EMI Principal Interest Tax Benefit*
1 1,30,455 79,378 51,077 10,420
But conflicting point here is again its written that entire interest can be claimed unlike home loan interest.
Can you give calrification on this point.
The table actually says amount saved assuming 20% tax bracket. I think I will remove this column as it might create confusion. For education loan entire interest is deductible for taxable income.
I want to take education home for my son in next month. If opt pay interest per year during study period (b tech in NIT 2017-2021), can I avail tax benefit under 80 E w.e.f financial year 2017-18 and till what year. please suggest me.
Yes you can avail tax exemption on the interest paid for education loan. If the first interest payment happens in FY 2017-18 you can claim exemption up to FY 2024-25 (total 8 financial years)
Hi sir,
I am repaying my education loan for last 5 years, so can I take last 5 years interest for tax exemption?
This year I am going to pay IT first time .
Kindly guide me...
You can claim tax exemption on education loan for the interest paid in the relevant financial year only - not on the previous years payments.