Section 80E : Income Tax deduction for Education loan
As per the Income tax act a tax payer is allowed to claim deduction under chapter VI-A for the repayment of Education Loan under section 80E. On repayment of education loan the interest on such loan is allowed as deduction under section 80E, however the same is applicable only to individual and not to HUF.
Only an Individual can claim deduction under section 80E for repayment of interest on education loan provided that the loan was taken for the Higher education of self or spouse or children or the student to whom the individual is legal guardian. The silent features of claiming deduction under section 80E are mentioned below:
1. Amount and the nature of deduction.
The deduction allowed under section 80E of chapter VI-A is only for repayment of interest on Education loan and not for the repayment of principal amount of education loan. At the time of availing the education loan, the bank issues a statement stating how much amount is to be paid per annum for principal repayment and how much amount is to be paid for interest on Education Loan.
There would be no treatment of repayment of principal for the purpose of Income tax and only the amount repaid as interest on Education Loan is allowed to be claimed as deduction while filing the Income tax return.
There is no maximum limit for claiming deduction under section 80E.
2. Purpose of Education Loan.
The deduction under section 80E is allowed only if Education Loan was taken for the purpose of Higher education of self or spouse or children or the student to whom the individual is legal guardian.
The Government has also defined Higher studies and it means any regular course pursued after clearing the senior secondary exam. In the the budget 2009, the Finance Minister also extended this deduction to Vocational courses. This deduction is not only allowed for courses pursued In India but also allowed for coursed pursued outside India as well.
3. Loan from organisations allowed for claiming deduction.
Deduction under section 80E is allowed to be claimed only if Education Loan is taken from any financial institution or approved charitable institution. Education loan taken from relatives or friends do not qualify for deduction under this section.
4. Period of deduction.
The deduction under section 80E is allowed to be claimed in the year in which the individual starts paying the interest on Education loan and in 7 succeeding years. Thus this deduction is available for a maximum period of 8 year or until the interest is repaid by the individual in full which ever is earlier.