Get a FREE e-course "Basics of Personal Finance"

           
  • Income Tax: Rules, Forms (ITRs), Filing
  • Investments: Stocks, Mutual Funds, ULIPs, Gold, Real Estate
  • Insurance: Term Insurance, Endowment Plans, ULIPs
  • Loans: Home Loans, Auto / Car Loans, Lease, Hire Purchase

Name:

Email:



Income Tax (IT) benefit of an education / study loan – Section 80E

This article explains how you can save income tax under section 80E if you have availed of an education / study loan. It also tells you the nitty gritties: what is the process, how much you can save, who can benefit from this, etc.

[This article has been inspired by queries from readers Ravi Gunti and Subramanya]

Get educated, save tax!

We know that a home loan can help you save tax.

(Want more details? Check out “Income Tax (IT) Benefits of a Home Loan / Housing Loan / Mortgage”)

So, is there any other loan that can help you save tax? Well, there is – an education loan or a study loan.

That’s right! When you take an education loan for pursuing higher studies, you not only acquire a great degree, but also save income tax while repaying it!

(Income tax benefit for an education loan is available under section 80E of the income tax act).

 

How much tax can you save?

The entire interest that you pay on your education loan is deductible from your income. There is no upper limit to this amount – you can deduct the full interest paid during the year from your income of that year.

Thus, you can save upto 30% of this amount as tax – depending on which income tax bracket you fall into.

(Want to know the current tax slabs? Please read “Income Tax (IT) Slabs / Brackets – FY 2008-09 AY 2009-10”)

Please note that there is no tax benefit available for the principal that you repay.

(Earlier, you got a deduction for both the principal and the interest, but there was a limit of Rs. 40,000 on the amount that you could deduct. Now, you can claim only interest, but without any cap).

Remember – the income tax benefit available for a study loan u/s 80E is separate and distinct from the tax benefits available under section 80C. This benefit is over and above the benefits of section 80C.

(To know more about section 80C deductions, please read “Saving Income Tax – Understanding Section 80C Deductions”)

 

When is the income tax benefit available?

The tax benefit under section 80E is available from the year in which you start repaying your education loan.

It is available for a total of eight years – the year in which you start the repayment, and seven years following it.

If your loan repayment is for more than 8 years, you would not be able to claim deduction of the interest paid from the ninth year onwards.

 

Who gets the tax benefit?

The person availing the loan gets the tax benefits, provided the loan is taken for:

  • Self
  • Spouse, or
  • Children

Thus, if you take an education loan for yourself, you would get the tax benefit. You would get the tax benefits even if you take the loan for your spouse or kids.

Also, if you take the loan for your son or daughter, you would get the tax benefit – not your son or daughter.

(Till some time back, the tax benefit was available only if you took the loan for yourself – loans for spouse and children were not allowed u/s 80E).

Education loan taken for siblings (brother / sister) or other relatives (in-laws, nephew, niece, etc.) would not qualify for section 80E benefit.

 

Other important considerations

Source of the loan

You need to have taken the education loan from a financial institution (this includes banks) or an approved charitable institution. A loan taken from your employer, family or friends would not be eligible for deduction u/s 80E.

Source of the income

The loan repayment has to be from your taxable income of that year. If you repay the loan from your savings or from money received from someone, you would not get the income tax benefit.

Courses eligible

The deduction under section 80E is allowed only for education loans taken for graduate or post graduate (PG) courses in engineering, medicine and management, or for post graduate courses in applied pure sciences (including mathematics and statistics).

The course that you enroll in has to be a full time course – tax benefit is not available for part-time courses.

Related Articles:

Comments via Facebook

Facebook comments

Comments

  1. Loan taken while at service for pursuing higher education in management (MBA or other) , will it fall under full time course or part time course, will be eligible for 80E benefit ?

  2. During the moratorium period before you start paying the EMI, the interest accrued on the principal is added to the principal amount.

    This component is the pre-EMI which becomes part of the total to calculate the EMI when you start repayment.

    My question is whether the pre-EMI component is tax deductable u/s 80E or not?

  3. Hi Pranav,

    In my opinion, loan taken for foreign education also qualifies for deduction under section 80E. So, I don’t think you should be worrying about it.

    In fact, even loans taken from financial institutions / banks abroad (foreign banks) can qualify for deduction under section 80E if the conditions mentioned in this article are fulfilled.

  4. Hi Rizwan,

    whether a course is full-time or part-time is specified by the university / institution offering the course. So, please check with the institution.

    But in general, courses pursued along with a job are usually part-time.

  5. Hi Kerman,

    The deduction u/s 80E is available only after you start repaying the education loan.

    Thus, you would be able to claim the amount only after you start paying the EMIs.

    In any case, as you have mentioned, the pre-EMI interest is included in the calculation of your final EMI amount – so you would not be losing out on any tax benefit.

  6. Hi RaagVamdatt ,
    Thanks for the article and the discussions. I have one doubt regarding the same.

    Can we claim deduction under 80E for education loan of abroad studies?

    I was listening to CNBC awaaz where someone asked the question and answer was no. Kindly help as my father has already claimed the interest accrued under 80E for My sister’s education loan for abroad studies. Loan from SBI.

    Thanks in Advance.

  7. Hi RaagVamdatt ,

    Apologies for the multiple posts and thanks very much for the response. Greatly appreciated.

    Regards

  8. Hi Arun,

    The information that you are quoting is old – the article describes the provisions of the latest amendments.

    The limit of Rs. 40,000 is no more applicable – the full interest amount can be claimed as deduction.

    Also, interest paid on loans taken for (some) relatives is also considered now.

    You can check out the provisions of Section 80E at: http://law.incometaxindia.gov.in/TaxmannDit/DispCitation/ShowCit.aspx?fn=http://law.incometaxindia.gov.in/DitTaxmann/IncomeTaxActs/2008ITAct/section80E.htm

  9. Hi RaagVamdatt,

    My lawyer advised that the deductions available under Section 80E for parents repaying the education loan for their child are no longer available based on certain amendments.

    The information from the Income Tax department website i.e. http://www.incometaxindia.gov.in/publications/1_compute_your_salary_income/4_deductions.asp also suggested that the limit is now Rs. 40,000 and applies to the individual taking the loan only.

    Is this correct or am I missing something?

    Thanks

  10. Hi RaagVamdatt ,

    The information on the IT department website http://www.incometaxindia.gov.in/publications/1_compute_your_salary_income/4_deductions.asp suggests that the limit is Rs. 40,000 and applies to the individual only.

    Have there been any amendments/modifications to 80E in the current financial year?

    Thanks

  11. Hi RaagVamdatt,

    My tax lawyer has advised that there have been amendments to Section 80E and the rebate limit is not Rs. 40,000 and is applicable to the individual taking the loan only.

    Would be great if you could comment and authenticate?

    Thanks

  12. Anonymous says:

    Hi Naveen,

    In my opinion, the entire interest that you pay during the FY is deductible from your income u/s 80E irrespective of the amount mandated by the EMI.

    Thus, you should get deduction for the entire interest paid.

  13. Anonymous says:

    Hi Anil,

    There is no upper limit – the entire interest paid during the financial year is tax deductible.

  14. Thanks RaagVamdatt for such a wonderful site!
    Please resolve my query.

    I took educational loan for full time course ending on June 08 and paid the full loan (principal and interest) in single payment on 29 Jan ’09 from my salaried income.

    Can I claim deduction on the full interest paid on the loan or will it be only on interest payable during the financial year from apr ’08 to payment date.

    Please respond as my other investments decision will depend on this and only one month is left.

  15. What is the maximum limit of Under section 80 E?

  16. Can i save income tax on the amount which i am spending on my real brother studies.As he is dependent on me.If i can then what is the proper procedure.

  17. Anonymous says:

    Hi Jatin,

    Unfortunately, this deduction is available only for amount spent on self, spouse or childern.

    It is not available for brother / sister (sibling) or cousines.

  18. Anonymous says:

    Hi Digvijay,

    Thanks a ton for the compliments – I am really glad that you are finding the information useful!

    Coming to your question.

    The tax benefits of an education loan are available only on the interest paid on the loan.

    When you prepay the loan, you would be repaying some of the principal – and there is no income tax benefit for that!

    So, paying more loan amount would not help you save tax.

    But there are many avenues of saving income tax. Check out the following articles that present a comprehensive list of the most popular avenues:

    - Saving Income Tax – Understanding Section 80C Deductions

    - Reached Section 80C limit? You can still save more income tax!

  19. Digvijay says:

    Hi Raagvamdatt

    What a fantastic job you are doing by giving information on TAX saving . last two days i m reading all the details . congrats

    One queston from my side . I have taken eduatin loan in June 2006 . And my EMI started in month of Dec 2009 . I paid 40 k in the 2008-09 as interset for which i got tax benefit . But my salary incresed in the momnth of April 2009 and i landed in 30 % tax payer bracket . i need to save more tax in the year as i do not have other investment . Is it possible if i pay more loan amount in 2009-10 to save the tax . Will i get full benefit if i pay aprro 2 lacs laon ?

  20. Digvijay Patil says:

    Hi raagvamdatt

    Thanks a lot for your quick reply . I am bit confused . will elabroate more.. Let say if i repay 1 lac ( Int+ Pri)amount against banks actual EMI 60,000( 5000*12). Hence should i pay more 40 ,000( Means 1 lac in current year ) so that i will get the interset benefit of that 40k extra paid in current financial year itself . As mentioed by you i had read 80c related information also but wont able to save more than 1 lac under 80c ? hence what to get more benefit under education loan itself .

  21. Anonymous says:

    Hi Digvijay,

    When you pay an extra amount over and above your EMIs, you pay part of the outstanding balance. (Why would you want to pay an extra interest anyway??)

    Since the tax benefit is only for interest paid, and not for principal repaid, no income tax benefit would be available for this extra payment.

    (However, you would be repaying some of your loan, and therefore would be reducing your debt – which is a very good thing)

    If you have reached the limit of Rs 1 Lakh under section 80C, you can explore the other article mentioned above. I am sure you would find some avenue to save your tax there.

  22. Digvijay Patil says:

    Thanks a lot ..

  23. Anonymous says:

    Hi R K Kumar,

    Tax benefits u/s 80E are available only after the repayment starts. So, in this case, no deduction would be allowed.

  24. R.K.Kumar says:

    No payments (principle /int) have been paid to th bank.
    Whether accrued interest so far upto march,09 can be taken as deduction under 80e for ay 09-10

  25. Anonymous says:

    Hi Probal,

    1. Interest actually repaid

    2. A bank statement stating the interest repaid should be enough

    3. No. Only the interest you have repaid can be claimed as deductible.

  26. Hi,

    I am a first time tax payer. I had a 2-3 queries regarding the deductions on this section. Would appreciate your help.

    1. How do I calculate the deduction on the loan i.e. is the interest repaid or is it the total interest accumulated over the year. How do I calculate this from my account statement ?

    2. What are the documents reqd as proof of this deduction ?

    3. Over the past FY, I have repaid my loan intermittently i.e. 6-7 EMIs were paid by me over the year. How does this effect my tax calculation ?

    Thanks.

  27. Thanks RVD…

    M on course to claim a refund… :-)

  28. Hi Aditya,

    Your wife would need to claim the benefit u/s 80E.

  29. Hello Raagvamdatt,

    Me and my wife are co-applicants for an education loan taken by me. The EMIs are paid by her as I am studying and not earning anything. Who can claim the benefits u/s. 80E?

    Thanks
    Aditya

  30. B K Singal says:

    I have taken a loan for higher education (abroad) for my son from my EMPLOYER for the courses eligible under the I.T. Act. Wiil this loan qualify for IT rebate. Please also quote relevant provisions / rules.

  31. narendar reddy says:

    can i claim interest exemption under section 80E for the loan taken by my son for pursuing higher education abroad.

  32. Anonymous says:

    Hello Mr. Singhal,

    A loan from your employer would not qualify for this – it has to be from a financial institution.

    This has been clearly mentioned in the article.

  33. Anonymous says:

    Hello Narendar,

    The person availing the loan gets the tax benefit. So, if your son has taken the loan, he would get the tax benefits. You can not claim the tax benefits.

  34. K Sudarshan says:

    Interest on loan taken for foreign education shall not be eligible for deduction u/s 80E post an amendment effective from AY 09-10 , whereby the term higher education has been amended as follows:

    “higher education” means any course of study pursued after passing the Senior Secondary Examination or its equivalent from any school, board or university recognised by the Central Government or State Government or local authority or by any other authority authorised by the Central Government or State Government or local authority to do so.

    Therefore loan taken for pursuing higher studies only in universities which are approved/recognised by the Central/State Govt of India shall be eligible for deduction u/s 80 E.

    Dear Raghavamdatt, sorry for infringing, just thought can add value for your efforts

    Regards
    Sudarshan

  35. Bal Krishan says:

    I am working in a Bank i.e. National Bank for Agriculture and Rural Development (NABARD) and has taken a loan from NABARD itself for higher education of my son abroad. Whether this will qualify for IT Rebate? Here in this case the employer itself is a Bank.

  36. Hi

    I had taken an education loan in June 2007 and had started repaying from August 2009. By March 2009, my loan already had a certain amount of accrued interest. My bank tells me that interest accrued till this date is not tax deductible and that only the interest accrued in the financial year 2009-10 is eligible for tax deduction. Is it true that only the interest accrued in the last financial year is non taxable?

  37. Nita Rani says:

    Sir,my daughter is studing in abroad. She has taken loan from nationalise bank. Me and my husband are the coapplicant aswellas guaranter of this loan. My husband is a retired person and i’m paying the emi from my salary. Please let me know weather eligible for taking income tax rebate under section 80e.
    THANK YOU

  38. hi,

    i have a taken a loan of 3.5 lacs and the interest amount to 60k till now. I will be repaying the loan through EMIs from august. Will this 60k be considered for income tax benefit. Or, this interest will be accumulated to my principal and the EMI protion actually contributing to my interest amount will be considered ??

  39. I have taken a loan from Citi bank in U.S. for studies in U.S. Does s 80E apply in this case. In response to one of the queries in an earlier post you have responded that s 80 E applies. Why is it so? Is citi bank, U.S. part of the definition of ‘financial institution’ as envisaged in s 80E or is there any court ruling in this regard.

    My employer does not consider this to be covered u/s 80E and hence they deduct tax at source not considering this exemption. Pl back it up with sound reasoning.

  40. Punyasloka says:

    When to submit the documents(bank statement or 80E certificate) for claiming? Is it during the filling of tax return? And what sort of documents are needed for claiming u/s 80E.

    Thanks,
    Punya

  41. Govind Rajan says:

    I am an NRI, would like to return to India. I would like to invest my foreign income in FD’s in banks (about 50 lacs) and get monthly interest as pension. Can this be done?? What is the upper limit of investment, how much TDS should I pay, what are the exemption limits.
    Should I file Income tax returns every year after I return?

  42. Avinash Chandra says:

    Education loan has been approved on my application for higher studies of my son by State Bank Group and the payment is made thru loan account in the name of Son & Father. As per standard practice. The first name in loan accounts is always for whom the loan is taken. The Re-Payments are being made thru my salary account.
    Can I claim the Tax rebate u/s 80E? Employer is denying the benefit thru TDS.

  43. manoj pandit says:

    hi Raagvamdatt
    Is Education loan from Primary Agriculture Credit Cooperative Society(PACCS) is eligible for tax deduction under section 80E
    of IT Act?
    Thanks in Advance.

  44. prashant sadafule says:

    My father is a retired person. I have taken a educational loan for my younger sister. She is borrower & I am co-borrower. Interest payment is paid from my a/c it self also mentioned in loan sanction letter. Can I take the benefite for income tax.

  45. rajashekhar says:

    sir, i have taken a education loan of 7 lakh in may 2007. my intrest added upto now is 1.5 lakh. wheter i can claim deduction for 1.5 lakh intrest added till now in the end of financial year in which i start paying the loan?

  46. Hi raagvamdaat,
    I have just started my work and am a novice to all the tax fundas. But you’ve really cleared things for me. I had a simple question.

    1. I had taken a education loan from a bank whose Principal is 7.5 lacs and interest is approximately comin upto Rs. 1900.I fall in the category of the 10% tax slab. I would be paying about 1400 as tax per month. I would like to know, using the interest rate of Rs.1900 how would i get a tax rebate on this Rs. 1400.

    I would really appreiciate your help as im thoroughly confused by many other people.

    Thanks

  47. Abhishek says:

    I have the same question…I took loan from citibank USA and completed my post grad in USA,i have returned to India and joined a company in Mumbai, however my employer is saying that interest repayment will not be tax exempt because Citibank is a foreign bank.

    However, my argument is that Citibank does banking business in India . Therefore, it should be treated as any company which transacts the business of banking in India…please advise if this can be considered.

  48. Madhukar says:

    Hi,
    My wife did her graduation by taking an education loan. After completion of her studies, we got married and she is not working anywhere. I am paying her education loan EMIs as she is a housewife now. Am I entitled to get the tax benefits for the payment of my wife’s EMIs pertaining to education loan? Please reply back.

    Regards,
    Madhukar.

  49. dr pruthvi gm says:

    hi sir,i had availed educational loan of rs 1lakh 90 thousand from corporation bank in 2002 for my graduation, i had started repaying it since aug 2009. in aug 2009 i had paid 75000 rs as interest +principle.and in financial year 2010-2011 i have paid arround 2 lakh 90000 rs as interest+premium.for the loan i had availed the interest had accumulated over years. now my question is can i avail tax benifit for the entire interest amount that had accumulated over years which i have paid this year which is approximately rs 1 lakh 20 thousand, or just only that interest that came this financial year only which is just around rs 15000.sir kindly reply to this as early as possible because many of my friends are in same confusion and want to clarify it. this question is in behalf of aii my friends. kindly reply soon. thank u.

  50. Hello Raagvamdatt,

    Needless to say, I am never dissatisfied from any of your articles. It always reads our minds. It gives a crisp but complete information.

    Thank you very much for your wonderful service and may god bless you.

    I found out one contradiction here. You had said that the Tax deduction under Sec 80E is NOT applicable for the part time course but only for a full time course. You had also told that the source for the loan amount (Principle + Interest) should be from the applicant’s taxable salary income.

    Aren’t they contradicting? How come a full time course student pay the loan amount from his salary? It may be possible if he is pursuing his course while being employed in parallel. Am I right?

    Thanks,
    Raghavan alias Saravanan M
    Bengaluru | India
    http://shade.org.in

  51. dr. Shrikrishna kulkarni says:

    My son studying in UK Oxford university course Bsc Hon. Psychology,Sports Exercises Sciences. He has taken Edu.loan from SBI in sept.2011.He is Propritor of Buisness in India and generating buisness income during fin.year2011-12.
    Please tell me ,whether loan interest paid by him in fin. year is exumpted to my son under section80E ?

  52. abhijit pal says:

    If two education loans are taken for diffierent children in different year, can the parent claim income tax section 80E for both the cases

    • veerendra says:

      If three education loans are taken for two childrens in different year, can the parent claim income tax section 80E for both the cases

  53. Hi! This is kind of off topic but I need some advice from an established blog.
    Is it very hard to set up your own blog? I’m not very
    techincal but I can figure things out pretty quick.

    I’m thinking about creating my own but I’m not sure where to
    start. Do you have any tips or suggestions? Cheers

  54. Link exchange is nothing else however it is only placing the other
    person’s website link on your page at appropriate place and other person will also do similar for
    you.

Speak Your Mind

*

More in Income Tax, Loans
Income tax treatment of leave travel allowance / concession (LTA / LTC)

The government wants to encourage us to travel more and explore our country, and wants to assist us. That’s why...

Close