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Deduction in respect of interest on loan taken for higher education – Section 80E

Eligible Assessee – Individual (whether resident or not)

Eligible Amount – The amount of interest paid on education loan is allowed as deduction. The amount of principal repaid is not allowed as deduction. There is not any maximum limit for the amount of deduction.
And it is also necessary that the loan should be taken from any financial institution or approved charitable institution.

Interest is allowed as deduction only  when such interest is paid out of income chargeable to tax.

100% of such Interest is deductible if the following conditions are satisfied:

  • If the loan is taken for higher education of (i) assesse himself or (ii) his relative (spouse, child or student of which assessee is a legal guardian)
  • If the loan is taken from any financial institution (banking company or notified financial institution) or an approved charitable institution (i.e an institution approved for the purpose of section 10(23C) or 80G(2)(a))

Deduction is allowed for the

  • Year in which assesse starts paying the interest
  • and in succeeding 7 years

Meaning of Higher Education:

Higher education covers all fields of studies (including vocational studies) 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.

Other points –

  • Deduction is allowed to the person in whose name loan is taken. If your parents, spouse has taken loan for your studies then deduction is allowed to parents or spouse and not to you.
  • The loan may be used for the tuition or college fees or may also be used for incidental expenses like hostel fees etc.
  • There is no condition that the higher education is pursued in India.

 

3 comments

  1. Dear Sir, I took personal of Rs.4 Lakhs(36EMIs) from M/s.Bajaj finance in april, 2015 for the purchase of house site. Now, I am paying monthly EMI of Rs.14,113/-. Is the interest exempted from Income tax Sec.24, or 24(b) ?
    Please acknowledge the same.

    Thanks,
    Mahendra

  2. Dear Sir, I took personal of Rs.4 Lakhs(36EMIs) from M/s.Bajaj finance in april, 2015 for the purchase of house site. Now, I am paying monthly EMI of Rs.14,113/-. Is the interest exempted from Income tax Sec.24, or 24(b) ?
    Please acknowledge the same.

    Thanks,
    Mahendra

    • Prateek Agarwal

      Deduction is allowed only for interest paid on housing loan.
      Therefore no deduction is allowed in your case.

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