SECTION 80 E OF INCOME TAX ACT

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SECTION 80 E OF INCOME TAX ACT

SECTION 80 E OF INCOME TAX ACT 

                        

Have you taken an education loan to support higher studies of yourself or of your spouse, Children or for the student of whom you are legal guardian and you are not aware of the Income Tax deduction under Section 80E that you are entitled to, then here is the guide that will aid you to know deduction under section 80E Deduction under section 80 E is available if the following conditions are satisfied:-

Condition 1

The assessee is an individual

Condition 2

He had taken a loan from any banks, financial institution or an approved charitable institution. Education loan taken from any Financial Institution outside India

Condition 3

The loan was taken for the purpose of pursuing higher education.[Higher education would 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.]

Condition 4

Educational Loan should have been taken for the purpose of pursuing higher studies of Individual , Spouse, Children of Individual or of the student of whom individual is legal Guardian.  Hence parents are also eligible to claim deduction of interest paid by them on loan taken for their children’s education.

Condition 5

Amount is paid by the individual during the previous year by way of interest on such loans

Condition 6

Such amount is paid out of his income chargeable to tax

 

  • AMOUNT OF DEDUCTION:

The amount of interest paid is eligible for deduction and moreover there is no cap on theamount to be deducted. The deduction allowed under section 80E of chapter VI-A is only forRepayment of Interest on Education loan and not for the purpose of Repayment ofPrincipal on Education loan.

  • PERIOD OF DEDUCTION:

The deduction for the interest on loan starts from the year in which you start repaying the loan. Itis available only for 8 years starting from the year in which you start repaying the loan or until the interest is fully repaid whichever is earlier. It means if entire payments are done in 5 yearsonly, then tax deduction will be allowed for 5 years and not 8 years.It should also be noted that if your loan tenure exceeds 8 years, then you cannot claim a deduction for the interest paid beyond 8 years. So it is always advisable that an education loan is paid within eight years.

  • DOCUMENT REQUIRED TO CLAIM DEDUCTION UNDER

SECTION 80E:

You need to obtain a certificate from your Bank / financial institution or approved charitable institution from whom such education loan is been taken. Such certificate should segregate the principal and interest portion of the education loan paid by you during the financial year. The total interest paid will be allowed as deduction. No Tax benefit is allowed for the principal repayment.

  • HOW SECTION 80C DIFFERS FROM 80E

80C gives a deduction for payment of tuition fees at school, college and university level up to Rs 1.5 lakh per annum. However Section 80 E gives a deduction for education loan interest rather than tuition fees. Both the clauses are exclusive of each other.

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