Who Can Actually Claim Section 80E on an Education Loan? The Answer Most Borrowers Get Wrong

Quick Summary: 

Here is a number that should worry anyone repaying an education loan. According to the Press Information Bureau, for the assessment year covering recent filings, 72 percent of taxpayers, about 5.27 crore people, opted for the New Tax Regime, while only 28 percent stayed in the Old Tax Regime. That single statistic quietly disqualifies the majority of borrowers from claiming the education loan interest deduction under Section 80E, and most of them have no idea.

This is the part competitors skip. Every other guide explains what Section 80E is, that it covers interest on an education loan, that there is no upper limit, that it runs for eight years. All technically correct. All useless if you have made one of three mistakes that silently void your claim, the wrong tax regime, the wrong person claiming, or a misunderstanding of when the eight-year clock starts.

Across the 35,000+ students GyanDhan has advised on study-abroad financing, the education loan interest certificate and the deduction it unlocks are among the most misunderstood parts of the repayment journey. Not because the law is complicated, but because the assumptions students carry into it are wrong. So before you file, let us settle the question almost nobody answers properly. Who can actually claim this deduction, and who is quietly losing it.

The Biggest Trap in 2026: The Tax Regime Almost Nobody Checks

The Section 80E deduction is available only under the Old Tax Regime. As ClearTax's breakdown of the section confirms, this deduction is available only under the Old Tax Regime, and only individuals can claim it. If you file under the New Tax Regime, you cannot claim a single rupee of education loan interest deduction, no matter how much interest you paid, no matter whose name the loan is in, no matter how perfect your interest certificate looks.

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  Here is why this matters more now than ever. The New Tax Regime under Section 115BAC is the default. As the referencer on AY 2025-26 tax rates notes, the Finance Act 2024 amended Section 115BAC to make the new tax regime the default for individuals, HUFs, and most other taxpayers, with the option to opt out and choose the old regime. Default means that if you do nothing, you are automatically placed in the regime that strips out Section 80E. According to ClearTax's guide to Section 115BAC, deductions under Chapter VIA including 80C, 80D, and 80E are not allowed under the new regime, with only narrow exceptions like 80CCD(2) and 80JJAA.
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  Pair that with the filing data and the scale becomes clear. The same PIB release on ITR filings shows the regime split, and a government statement carried by NewsOnAir confirms it: of the 7.28 crore returns filed, 5.27 crore were filed under the New Tax Regime against 2.01 crore under the Old Tax Regime, roughly 72 percent versus 28 percent. A large share of those filers are salaried young professionals, exactly the demographic still repaying an education loan for a degree finished two or three years ago. Many switched because the headline rates looked lower, without realising they were trading away their loan interest deduction.
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  What changed and why it matters: under the older system you had to actively opt into the new regime. Now the burden is reversed. To claim the education loan interest certificate for income tax purposes, a salaried borrower must consciously opt out of the new regime each year directly in the ITR, and a borrower with business income must file Form 10-IEA before the due date to choose the old regime. Miss that step, and the deduction is gone for that year. This is the single most expensive Section 80E mistake being made right now, and it is invisible because nothing on your certificate warns you about it.

Here is what that actually costs in rupees. Take a borrower in the 30% slab paying ₹2,00,000 in education loan interest in a year. Under the old regime, that entire ₹2,00,000 comes off taxable income, saving roughly ₹62,400 once the 4% cess is added. Under the new regime, the same borrower claims nothing and saves ₹0. Over four or five repayment years, that is two and a half to three lakh in lost relief on a single loan.

One more thing for 2026. Under the new Income Tax Act, 2025, which replaces the 1961 Act, section numbers have been reshuffled and the education loan interest provision is being renumbered, commonly mapped to Section 129. The number on the form may change, but the substance does not: old-regime only, interest only, eight years, no cap. Do not let a renumbered section make you think the rules have loosened.

The honest takeaway: do not assume the new regime is better just because the slabs look friendlier. Run both through a calculator before you file.

Who Is Legally Allowed to Claim the Education Loan Interest Deduction?

Now the question in the title. Eligibility is narrower than most people assume, and it hinges on two words that get conflated: liability and payment.

The deduction is for individuals only. As Tax2win's Section 80E guide explains, interest paid on education loans for the higher studies of self, spouse, or children, including someone for whom you are the legal guardian, can be claimed, and only individuals qualify. HUFs, companies, and trusts are out.

But here is the rule that trips people up. Per BankBazaar's explanation of Section 80E, the deduction can be claimed only if the loan is in the name of the taxpayer claiming it. The benefit goes to the person who is legally liable for the loan and who actually pays the interest. It is not something you can freely assign to whoever has the higher income that year.

Why this confuses families: in most Indian education loan structures, the student is the primary borrower and a parent is the co-applicant. Both names sit on the agreement, so families assume either one can claim, or that they can split it to maximise savings. They cannot. The deduction belongs to the person whose income is being assessed and who is discharging the interest liability.

This is where the real-world cases get messy, and where most guides go silent. Here is how the common situations actually resolve:

The pattern across every row is the same: the claim follows the person who is both legally on the hook and actually paying. We have seen families where a parent paid EMIs for three years while the now-employed student claimed the deduction without paying a rupee toward it. That claim does not survive scrutiny. Decide at the very start who repays and who claims, then keep the bank records, the education loan interest certificate, and the EMI debit account all pointing at the same person.

The Eight-Year Clock: When It Starts and What Quietly Ends It

Almost every guide repeats that Section 80E lasts eight years. Very few explain the part that costs people money, when the clock starts and why it can run out while you still owe interest.
 

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  The clock starts at first repayment, not at sanction. BankBazaar notes that deductions can be claimed from the start of the first repayment for a total of eight deductions covering the interest component. Two things follow that borrowers consistently miss.
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  First, the moratorium reality. As Tax2win's FY 2024-25 guide states, the deduction can be claimed only once repayment begins, not during the moratorium period when no EMIs are paid. But the useful insight is the opposite one. ICICI Bank's own guidance points to a smart move: per ICICI Bank's note on maximising 80E benefits, you should begin paying interest during the study period rather than waiting for the moratorium to end, so you can claim deductions earlier and maximise the benefit across the eight years. Starting interest payments early shrinks the principal your interest later compounds on, and lets you bank deduction years you would otherwise waste.
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  Second, the eight-year ceiling can expire before your loan does. The benefit runs for a maximum of eight years or until interest is fully repaid, whichever comes first. If you took a 10-year loan and have claimed since year one, years nine and ten give you no Section 80E benefit at all, even though you are still paying interest. This is exactly where a foreclosure or prepayment decision should be revisited. Once the tax shield is gone, the real cost of carrying that loan jumps.

What Actually Qualifies, and What Borrowers Wrongly Assume Does Not

A few quieter eligibility realities that rarely make it into generic guides.

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  The loan source matters. As Fincart's Section 80E explainer notes, the loan must be taken from a recognised financial institution such as a bank or NBFC, or an approved charitable organisation, and loans from friends or family do not count. A surprising number of families fund education through a personal loan, a home loan top-up, or borrowing from relatives, then try to claim 80E. None of that qualifies.
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  Only interest, never principal. Per Credila's Section 80E article, only the interest component of your EMI is eligible, the principal does not qualify, and you need a certificate from your lender confirming the interest paid during the financial year. This is precisely why the education loan interest certificate separates interest from principal, and why your ordinary account statement is not enough to claim the deduction.
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  Studies abroad are covered. Credila confirms that if you are funding a child's higher education through a study abroad loan from a recognised institution, the interest qualifies under Section 80E. Indian students heading to the US, UK, Canada, Germany, or Australia on an Indian-lender education loan are fully in scope.
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  No upper limit, which cuts both ways. As DisyTax's Section 80E guide states, there is no monetary cap, so if you paid ₹3,00,000 in interest in a year you can claim the full amount, subject only to the eight-year limit. This is what makes 80E unusually powerful for study-abroad borrowers, and exactly why losing it to the regime trap is so costly.

How to Actually Claim It Without Losing the Deduction

The mechanics are simple once eligibility is sorted. The mistakes happen around the edges.

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  First, opt for the old tax regime, deliberately. This is the step 72% of filers skip by default. If you intend to claim the deduction, choose the old regime in your ITR, or file Form 10-IEA if you have business income, and run both regimes through a calculator first.
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  Second, get your education loan interest certificate from the lender. This document, sometimes listed as the educational loan interest certificate, is what splits your interest from principal, and you should treat this education loan certificate as the single piece of proof your whole claim rests on. Most lenders issue it as a downloadable education loan interest certificate pdf through net banking. 
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  Third, report it correctly. Credila's guidance is clear: while e-filing, mention the interest amount under the Deductions under Chapter VI-A section. No documents are attached to the ITR, but keep the certificate, loan agreement, and payment proof on record.

Fourth, confirm the claimant matches the payer. The person filing should be the one carrying the liability and paying the interest from their own income. Do not split it, do not reassign it for convenience.

Sources and References

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  ClearTax, Section 80E: Deduction in respect of interest on loan taken for higher education, Income Tax Act.
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  ClearTax, Section 115BAC New Tax Regime, features and disallowed deductions.
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  Press Information Bureau, Government of India, ITR filing data and tax regime split, and NewsOnAir / Finance Ministry on record ITRs filed.
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  Referencer, Income Tax Rates AY 2025-26, Section 115BAC default regime.
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  Key Facts Statements and education loan interest certificate formats from major lenders including SBI, HDFC Bank, ICICI Bank, Axis Bank, and leading NBFCs.

Conclusion

Here is the uncomfortable part. For a meaningful share of borrowers reading this, Section 80E may not be worth optimising around at all, and pretending otherwise would be dishonest.

If your annual education loan interest is modest, say under ₹50,000, and you are in a lower slab, the deduction might save a few thousand rupees, easily outweighed by benefits you would forfeit by staying in the old regime. The right answer depends on your full income picture, not just the loan.

But for the borrower with a large study-abroad education loan, paying lakhs in interest in the early repayment years, in the 30% slab, Section 80E under the old regime is one of the most valuable deductions in the tax code, precisely because it has no ceiling. For that person, defaulting into the new regime is a silent, recurring, five-figure annual loss.

The deduction is not the mistake. Not checking which regime you are in, who is claiming, and whether your eight years have already run out, that is where the money leaks. The borrowers who get this right are not the ones who paid the most interest. They are the ones who ran the actual numbers before filing.

If you are unsure whether the old regime plus 80E beats the new regime for your specific loan, income, and remaining tenure, GyanDhan's team can help you model both scenarios against your actual loan terms. Check your loan eligibility and find out today.

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