For taxpayers in India, like a parent or a student planning for a higher education within the country or abroad, education loans can prove to be a breather with substantial financial support. One of the advantages for individual borrowers in India is the deduction offered, that can be one of the main education loan tax benefits
This section eases the burden of taxpayers by letting them avail the TDS for the interest paid on the education loans to study abroad without any 80E deduction limit on the claim. In this blog post, let us see the tax benefits available under Section 80E, the eligibility criteria to apply for this benefit, and the advantages you can reap.
This section gives the benefits of deductions on education loan tax by excluding the interest component of the loan repaid during that particular financial year. This deduction applies to individual taxpayers who have taken a loan for higher studies, either for their own benefits or for their family members. The tax deduction on education loan is available only on the interest paid and not on the principal amount to be repaid. This becomes an important advantage for students and the parents burdened with hefty interest payments on education loans.
The prevailing benefit of Section 80E is the tax deduction on education loan on the interest paid during that financial year. This means that the entire loan’s interest amount can be negated from your taxable income. This can reduce the burden of higher interest amount payable, especially for individuals who are in the early phase of repaying their loans.
In a few sections like that of Section 80C where there is a maximum cap, there is no cap on the Section 80E limit, on the amount of interest that can be claimed as a deduction. You can claim the entire interest paid that you have paid during the financial year, as long as the interest is paid diligently, and on time without any lapse while you have taken an education loan.
The Section 80E deduction is available for a maximum of 8 years from the year you start repaying the interest for your education loan taken. Though you have repaid your entire loan already, you can still claim the deduction for the coming first eight years of loan repayment period.
You can get the education loan tax benefits by claim the tax deduction on education loan under this section by following a few specific procedures such as-
It is compulsory to provide the details of the education loan when you apply for your tax returns, such as your lender’s name and the interest amount you have paid for the year.
If you are a salaried individual, your current employer will help you with a Form 16, which is a detailed concise document of your salary and tax details.
If necessary, you may have to submit documents like the loan agreement document and interest paid receipts to support your claim for tax deduction on education loan.
This section does not impose a limit on the amount of deduction. This lets you claim the full amount of interest paid in that financial year.
Among the education loan tax benefits of Section 80E covers the interest portion of the loan paid during the financial year. Here’s an example of how it works-
In this case, the individual’s taxable income comes down by the full amount of interest paid, giving the leverage of lower income tax liability.
With the filing of ITR for your education loan under Section 80E you enjoy the benefits of tax relief as taxpayers repaying education loans. With a significant deduction on the entire interest amount paid during the financial year, it eases the monetary burden on you, while looking to invest in higher education, either for you or their family members. With no cap limit on the deduction on the interest paid as one of education loan tax benefits, you can make valuable use of it while studying abroad or India for your higher education.
