Tax Benefits on Education Loan unders Section 80E
Getting higher education is no more a dream for aspiring candidates as there are many national, international and private limited banks which offer education loan. Earlier, paying higher fee of reputed institutions or thinking to study abroad is dream of children from financially well-off families only. But, in last one decade the situation has taken a giant turn, now you can borrow money from the banks to fund your higher education. Similar to the banking sector the income tax laws have given some benefits to those students and their parents who have taken loan for pursuing their education.
If you have taken an education loan to pursue your higher education, and now you are repaying that loan, you can always claim a deduction on your education loan under Section 80E. You can borrow an education loan for your children, spouse, or a student whom you are legal guardian. Here are some important factors to get advantages of education loan.
Deductions under Section 80E: The tax advantages for education loan under section 80E are allowed only for repayment of interest of education loan. The tax benefits can’t be claimed on the repayment of the principal amount. At the time of lending education loan, bank provides you a detailed document of break-up of amount charged as interest and principal amount. This deduction under 80E is over and above Rs 1.5 lakhs deductions allowed under Section 80 C and there is no maximum limit for claiming this deduction under Section 80E.
Which Course you have applied?
You can borrow an education loan for pursuing any course after completion of your senior secondary education (10+2) from a recognised board or university. Earlier, students who want to study courses such as medicine, engineering, etc., at graduation or post-graduation level were eligible to apply for education loan. However, the budget of 2009 has made amendments in that law. Now you can avail an education loan for part-time courses as well. Therefore, you can claim tax benefits for both the categories, either you have pursued a full time graduation/post-graduation programme or any part-time course. The main clause under this law is candidate must pursued the programme from any government/government recognised school, board or university. It might be recognised by local authority. You can also claim tax benefits if you are paying tuition fee of two children. This benefit is available under Section 80 C if the institute/school is situated in India. Besides, you can claim the tax benefits even if the study is pursued outside India.
Loan from organisations
You can claim tax benefits under section 80E only if you have borrowed the loan from any approved financial institution or charitable trust. If you have borrowed the money from your friends, relatives or from any unapproved organisation, in such situation you are not eligible to take the advantages of education loan tax deductions.
Tenure of Deductions: You can claim tax benefits once you start repaying your education loan. The day you start your repayments you can start claiming your tax benefits. This deductions under education loan is available for maximum 8 years or until you pay your interest, whichever is earlier.
