Section 80E deduction of study loan interest | Section 80E gives you a tax deduction on an "interest
item" charged on a loan taken out for the higher education of an individual valued. Educational credits
earned for higher studies in
What is Section 80E of Income Tax?
Section 80E is an income tax
exemption that applies to the deduction of an "interest item" paid by
higher education borrowers to notified financial or charitable organisations.
Interest paid on student loans taken out for higher education from yourself, a
spouse or children (including for which you are a legal guardian) can be claimed
as a deduction from taxable income.
Who can claim taxes on interest paid on student
loans?
This student loan repayment
deduction can be claimed by an individual for themselves, spouse, children and
anyone who is a legal guardian for them. Whoever repays the loan for the
above-mentioned individuals can avail of the 80E exemption.
If your parents share the EMI
payments, the extent to which the parents pay part of the EMI interest can be
charged to them and the rest to you.
What is the deductible amount u/s 80E?
There is no maximum or minimum
exemption limit specified in Section 80E. The amount of the deduction from the
deduction of interest payments is not affected by the interest rate charged by
the financial institution or charity, the amount of the loan or any other
factor. In this section, you will find the deduction from the interest actually
paid during the financial year.
To avail of the benefit u/s 80E, where should I
apply for a loan?
If you want to claim the 80E
benefit, you must borrow from:
The financial institution, or
A charitable institution.
Which financial institutions are notified under
section 80E?
Section 80E states that interest
paid on a student loan must be collected from a charitable organization or a
recognized financial institution. Any other organization from which the loan
was collected is not entitled to the deduction. These parameters can be
determined as follows:
Financial Institution - Under the
Banking Regulation Act, of 1949, a financial institution is defined as any bank
operating under the rules specified in the Banking Regulation Act.
Charity - A charity may be defined
as an authoritative body as defined in Section 23C of the Act.
What are the supporting documents required to
claim an exemption under Section 80E?
Exemption under section 80E is
required while filing income tax returns and supporting documents need not be
attached. The documents below should still be kept safe, if they need to be
forwarded to the Department of Financial Taxation in case of future
investigation.
Loan penalty documents.
Return documents of a financial
institution or charitable organization. Such statements must include a clear
breakdown of the amount of principal and interest paid.
What is the term/s for claiming the deduction?
Exemption under Section 80E can be
claimed for less than 8 years of assessment. But if you take out a loan account
first, the income tax deduction will be available for the relatively short
period that the loan was active.
For example,
You took a student loan in A.Y
2019-20 and started paying interest in that same year.
In this case, you can claim a
deduction u/s 80E for A.Y 2019-20 to A.Y 2026-27 (8 tax years).
Now imagine another situation where
you pay off the entire loan in just 5 years.
In this case, you can claim an 80E deduction for A.Y 2019-20 to A.Y 2023-24 (i.e. till the time you complete the loan)
Download Automated Excel Based Income Tax Salary Arrears Relief Calculator U/s 89(1)with Form 10E from the Financial Year 2000-01 to the Financial Year 2022-23 (Updated Version)
