Section 80E of the Income Tax Act provides a tax deduction from the total income in respect of educational loans. The deduction under section 80E can be claimed in respect to educational loans taken for higher studies of the children or spouse of a taxpayer. However, it is important to note that the deduction under section 80E is available only on the interest component of an educational loan. The principal repayment of the loan is not allowed as deduction.
Deductions under Section 80E
As per the Income Tax Act, “higher education” implies any course of study pursued after qualifying the Senior Secondary Examination or equivalent from any board or recognized university of the Central or State Government or any authority authorised by the Central or State Government or local authority to do so. An educational loan taken for foreign studies are also eligible as a deduction under section 80E of the IT Act. Section 80E also provides a deduction on loan availed for vocational training.
Section 80E Deduction Eligibility Criteria.
Following are the eligibility criteria for availing deduction under section 80E:
• Only individuals are eligible to claim the deductions under section 80E. Companies and HUF cannot claim this deduction.
• The deduction available under 80E is can be claimed for the interest component of an educational loan.
• Education loans obtained from charitable organisations and recognised financial institutions are eligible for deduction under 80E. Education loans or any other loans taken from relatives or friends are not eligible for deduction under this section.
•The deduction under this section is allowed only if the taxpayer has availed education loans himself/herself or his/her spouse or children.
•The deduction under section 80E can be claimed only if the loan is taken for purpose of higher education.
•The deduction under this section can be availed only for 8 years only, beginning from repayment from the first year.
•The tax deduction under this section can be claimed only if the loan is taken on the taxpayer's name.
Deduction amount under section 80E
• The deduction under this section is available for the interest amount only on the education loan taken for higher studies and there is no upper limit. A taxpayer can avail tax deduction on entire interest paid on such loan but not the Principal Amount.
• The deduction under section 80E is only available if interest is paid out of taxable income chargeable to income tax (i.e., deduction under 80E cannot exceed the taxable income).
Section 80E Foreign Education
The deduction under section 80E can be availed for interest component of an educational loan even when the loan is taken for a student studied abroad. Hence, the deduction allowed under 80E for education loan is a major incentive to the taxpayers for educating either himself/herself, children or spouse in India or abroad.
Exclusive nature of Deduction
Deduction available under Section 80E is over and above other deductions available under Chapter VI A of the Income Tax Act. That is, even if a taxpayer has availed the deduction of Rs, 1,50,000 U/s 80C of the Income Tax Act, the taxpayer an still claim the deduction under Section 80E.
Thus, a taxpayer being an individual availing education loan for higher education should avail the tax benefit in form of deduction provided by Section 80E of the Income Tax Act 1961.
Deductions under Section 80E
As per the Income Tax Act, “higher education” implies any course of study pursued after qualifying the Senior Secondary Examination or equivalent from any board or recognized university of the Central or State Government or any authority authorised by the Central or State Government or local authority to do so. An educational loan taken for foreign studies are also eligible as a deduction under section 80E of the IT Act. Section 80E also provides a deduction on loan availed for vocational training.
Section 80E Deduction Eligibility Criteria.
Following are the eligibility criteria for availing deduction under section 80E:
• Only individuals are eligible to claim the deductions under section 80E. Companies and HUF cannot claim this deduction.
• The deduction available under 80E is can be claimed for the interest component of an educational loan.
• Education loans obtained from charitable organisations and recognised financial institutions are eligible for deduction under 80E. Education loans or any other loans taken from relatives or friends are not eligible for deduction under this section.
•The deduction under this section is allowed only if the taxpayer has availed education loans himself/herself or his/her spouse or children.
•The deduction under section 80E can be claimed only if the loan is taken for purpose of higher education.
•The deduction under this section can be availed only for 8 years only, beginning from repayment from the first year.
•The tax deduction under this section can be claimed only if the loan is taken on the taxpayer's name.
Deduction amount under section 80E
• The deduction under this section is available for the interest amount only on the education loan taken for higher studies and there is no upper limit. A taxpayer can avail tax deduction on entire interest paid on such loan but not the Principal Amount.
• The deduction under section 80E is only available if interest is paid out of taxable income chargeable to income tax (i.e., deduction under 80E cannot exceed the taxable income).
Section 80E Foreign Education
The deduction under section 80E can be availed for interest component of an educational loan even when the loan is taken for a student studied abroad. Hence, the deduction allowed under 80E for education loan is a major incentive to the taxpayers for educating either himself/herself, children or spouse in India or abroad.
Exclusive nature of Deduction
Deduction available under Section 80E is over and above other deductions available under Chapter VI A of the Income Tax Act. That is, even if a taxpayer has availed the deduction of Rs, 1,50,000 U/s 80C of the Income Tax Act, the taxpayer an still claim the deduction under Section 80E.
Thus, a taxpayer being an individual availing education loan for higher education should avail the tax benefit in form of deduction provided by Section 80E of the Income Tax Act 1961.
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