Section 80E – An education loan not only lets you fund your expensive education, but it could also save you a hefty tax. If you have already obtained an education loan and have started paying the loan back, then the interest charged on that education loan is provided as a deduction from the gross income referred to in Section 80E. That being said, the deduction is made just for the portion of the EMI interest. There really is no tax gain for the principal portion of the EMI.
Who can claim Section 80E?
This deduction could only be claimed by a person. It is not open to HUF or just about any form of the taxpayer. The loan must be made for the higher education of self, partner or kids or for a student for whom the person is a legal guardian. Parents will readily demand this deduction on a loan taken for their children’s higher education.
The loan can be used to carry out higher research. It doesn’t matter if this educational loan is used for higher education in India or outside India. Higher studies cover all areas of study undertaken since the completion of a senior secondary examination or its counterpart. Which contains both vocational and regular classes.
Must Read – What is Section 80 CCC?
What is the deduction amount under Section 80E?
The deduction permitted is the gross amount of interest charged by the EMI for the FY. There is no cap to the overall amount permitted as a deduction. That being said, you will need to receive a certificate from your bank. This credential should separate the principal and the interesting part of the educational debt you have received in the course of the FY. The cumulative interest paid would be granted as a deduction. No tax advantage is allowed for the principal refund.
The deduction for the interest on the debt begins with the year in which you begin to pay back the loan. This is only valid for 8 years from the year in which you start paying back the loan or before the principal is entirely repaid, whichever is sooner. This implies that if the full repayment of the debt is made mostly in 5 years, the tax-deductible would be permitted for 5 years but not 8 years. It should also be remembered that if the term of the debt extends 8 years, you cannot demand a deduction for interest accrued in excess of 8 years. It is also generally advisable for an education loan to be returned within 8 years.
