Tax Benefits on Education Loan Under Section 80E

Deductions under Section 80E of the Income Tax Act is a provision that allows individuals to claim tax deductions on the education loan interest deduction. The principal repayment amount, however, does not qualify for any tax benefits under this section.

The deduction under Section 80E Chapter vi(a) of the Income Tax Act allows for the total interest paid on education loan EMIs during the financial year. There is no maximum limit on the tax exemption amount on education loans. To claim the deduction, you must obtain a certificate from your bank that clearly separates the principal and interest portions of the loan payment. Only the interest paid is eligible for tax benefits, while there is no tax benefit for the principal repayment.

Taxpayers who have taken loans exclusively to fund higher education are eligible to claim these deductions. Tax exemptions can only be claimed by individuals who have taken education loans in their own names. Both parents and the child, under whose name an education loan has been sanctioned, can avail of the benefits of tax deductions under Section 80E.;

The deduction can be claimed for a maximum of eight consecutive assessment years, starting from the year in which the individual starts repaying the loan or until the interest is fully repaid, whichever occurs earlier. Your bank issues a certificate as to the amount of interest paid by you on the education loan in the given year. 

The deduction under Chapter vi(a) under section 80E of the Income tax act can be claimed only once you start with the repayment and is available up to a span of eight years, or until the time the payment of interest is incomplete.For example, Raj, a borrower of an education loan, repaid his loan within a period of four years, and then he can claim the deduction only for those four years. On the other hand, Yash, another education loan borrower, repaid his loan during the full 8-year repayment period, and can avail his tax deductions for the full 8 years.
 

Similar to deductions under Section 80C and Section 80D, the interest component of education loans can be deducted from your income when calculating your tax liability. The deduction under Chapter vi(a) of Section 80E has no specific limit, allowing you to claim the entire interest amount paid in a financial year, regardless of the actual sum. This means that you can avail of the deduction for the entire interest paid, providing significant tax relief for education loan borrowers. This deduction for Chapter vi(a) of Section 80E of the Income Tax Act falls above and beyond the Rs. 1,50,000 deduction permitted under Section 80C.

1. Both parents and the child, under whose name an education loan has been sanctioned, can avail of the benefits of tax deductions under Section 80E. 
2. Hindu Undivided Families (HUF) and companies are not eligible for these tax exemptions.
3. Loans from friends and relatives do not qualify for the benefits provided under Section 80E.
4. These tax benefits are specifically applicable to the education loan interest deductions.

To claim the tax benefits under Section 80E of the Income Tax Act, individuals must follow these steps:

• Obtain a certificate: Your bank issues a certificate as to the amount of interest paid by you on the education loan in the given year. 
• Calculate the interest paid: Calculate the total interest paid during the financial year. This can be derived from the interest portion mentioned in the loan statement or the certificate obtained from the bank.
• File an income tax return: While filing your income tax return, report the interest paid under Section 80E of the Income Tax Act. Ensure that you accurately enter the details and double-check for any errors.
• Retain supporting documents: Maintain the necessary documents as proof of repayment, including loan statements, interest certificates, and any other relevant documentation. These documents are required for verification purposes or in case of any future audits.
• Keep records for future reference: It is advisable to retain copies of all documents related to the education loan, including loan agreements, payment receipts, and bank statements, for future reference and reference during subsequent financial years.

Some borrowers opt to utilize the entire repayment period for their education loan, strategically leveraging the tax benefits. This approach allows them to allocate their surplus funds towards investments instead of repaying the loan. By stretching the repayment period, they can take advantage of the education loan interest deduction for a longer duration. This strategy can be beneficial for individuals who believe they can generate higher returns through investments compared to the loan interest rate.

Choosing the right partner for your education loan journey is crucial. GyanDhan not only connects students with a wide network of banks and lenders but also provides comprehensive guidance on tax benefits and other deductions that can be claimed. By working with professionals who understand the intricacies of education loan financing, you can make informed decisions and optimize your tax savings.

Don't miss out on the opportunity to minimize your tax liability and manage the financial challenges associated with higher education. Take advantage of the tax benefits and exemptions available to you under Section 80E. Start your education loan journey with GyanDhan and ensure you receive expert assistance throughout the process.

The education loan interest deduction can be utilized for a maximum of eight years from the year of commencement of repayment or until you have completely repaid the interest amount, whichever occurs first.

The tax deduction under Section 80E is applicable to all individuals, irrespective of whether they are salaried or self-employed. The deduction can be claimed by the individual who has taken the education loan or by the parent or guardian of the student if the loan is taken in the student's name.

To claim tax deductions for an education loan, you are required to provide a certificate issued by the lending institution or a recognized charitable organization from which you obtained the loan.

As of now, only HDFC Credila provides tax benefits for education loans among NBFCs.

Yes, you can claim tax benefits under Section 80E while filing ITR.

Under Section 80E of the Indian Income Tax Act, there is no maximum limit or cap specified for claiming deductions on the interest paid towards education loan repayment. You can claim the interest amount as a deduction from your taxable income, without any upper limit.

All types of courses including vocational studies are applicable for tax benefits under Section 80E.

No, for tax benefits under section 80e you can claim deductions only on the interest paid and not on the principal amount.

Tax exemptions on education loans are only available through public and private banks only. As of now, HDFC Credila is the only NBFC that provides tax benefits.