Education Loan Tax Exemption – Complete Guide to Tax Benefits

Key Insights 

1. You can claim a full tax benefit on your education loan interest, with no limit on the amount you deduct. This applies to all interest paid for up to eight years.

2. You are eligible if you take a loan from a bank or approved institution for higher education for yourself, your spouse, or your children.

3. To claim your income tax exemption on an education loan, collect your loan agreement, the lender’s interest certificate, payment proofs, and course details.

Taking an education loan can help reduce your tax bill. Find out how income tax exemptions on education loans let students and parents save money and support future career plans.

This exemption is like a bonus for your education expenses. Just as scholarships reduce tuition costs, the interest on education loan deduction limits your taxable income. 

You can claim this benefit through Section 80E of the Income Tax Act, even if you follow the education loan tax exemption in new tax regime.

I used the interest on education loan tax exemption limit calculator and found that the ₹65,000 annual interest on my ₹8,00,000 loan is fully deductible. This education loan tax benefit saved me ₹13,000 each year, showing how helpful this exemption can be.

Eligibility Criteria for Education Loan Tax Exemption

Are you planning to continue your studies? Make sure you meet these important eligibility criteria to get tax exemptions on the interest from your education loan.

Here are the eligibility criteria for the education loan tax exemption:
 

• An individual can apply for a higher education loan for themselves, their spouse, their children, or a student for whom they are the legal guardian.
• Companies and Hindu Undivided Families (HUFs) are not eligible to claim this deduction.
• Only the person who took the loan can claim the deduction.

If you qualify for a few basic requirements, you could save money on taxes and make it easier to pay for college.

Bonus Tip: Do you know? Higher education refers to any course pursued after Senior Secondary, recognised by the Central or State Government or authorised bodies.

Deduction Limits Under Education Loan Tax Exemption (80E)

To get the most out of Section 80E, repay your higher education loan within eight years. Parents can use this section to help their children access better opportunities in higher education and support their future careers. 

If you plan to send your child abroad for studies and take a loan, you can also claim the deduction under Section 80E.

Example:

Meera works in marketing and lives in Delhi with her family. Her 18-year-old daughter, Priya, recently got into a top medical college. To pay for Priya’s four-year degree, Meera took out a ₹12,00,000 education loan. 

Now, Priya is studying and looking forward to a bright future. Meera’s loan will last 7 years, and during this time, she can claim a deduction on the interest paid under Section 80E.

You can get the most out of your education loan benefits under Section 80E by repaying the loan within eight years. This helps you save on taxes and plan for a better future.

Bonus Tip: Do you know? An "approved charitable institution" is an organisation named in the relevant regulations or set up for charitable purposes, and approved by the authority under clause (23C) of section 10. It also covers institutions listed in clause (a) of sub-section (2) of section 80G.

Required Documents for Education Loan Tax Exemption

Want to claim a tax break on your education loan? Here are the key documents you’ll need for your Section 80E deduction.

Here is the list of documents for the education loan tax exemption:
 

Collect the required documents, claim your tax deduction, and take a step toward your future with a smart education loan that saves you money.

How to Claim 80E Deduction in ITR? 

Looking to reduce your taxes with an education loan? This guide shows you how to claim your Section 80E deduction in your income tax return (ITR).

Here are the steps, which show you how you can claim the 80E deduction in ITR:

Step 1: Ensure Eligibility

First, check that your loan is from a bank or an approved charity and is for higher education. The loan should be in your name. You can claim this deduction for up to eight years, starting from when you start paying interest.

Step 2: Collect Necessary Documents

Gather documents like your loan agreement or sanction letter, interest certificates from your lender for the year, bank statements showing interest payments, and any other proof of payment. These documents show the interest you paid on your education loan.

Step 3: Calculate the Interest Amount

Check how much interest you paid during the year. This is the amount you can claim under Section 80E. Remember, only the interest is deductible, not the principal.

Step 4: File Your Income Tax Return (ITR).

When you file your Income Tax Return (ITR), include the interest you paid on your education loan as a deduction under Section 80E. This section is meant for education loan interest payments in the ITR form. R form.

To claim your 80E deduction, get your documents together and file your ITR carefully. This will help you save the most on your taxes.

Conclusion

You can get the most out of your education loan tax benefit with Section 80E. There is no upper limit on the deduction for interest paid on your education loan, so you can claim the full amount and plan your finances more effectively.

FAQS

Can I claim past education loan interest under section 80E? 

No, you can claim the interest paid on your education loan under Section 80E only for the financial year when you actually pay the interest.

Education Loan Interest Deduction under 80E. How Much Can I Claim?  

You can claim a tax deduction on the full interest you pay on your education loan under Section 80E. There is no maximum limit for this deduction. You can use this benefit for up to eight years, or until you finish paying the interest, whichever happens first.

Does an education loan reduce my income tax? 

If you are filing taxes under the old tax regime, you can lower your income tax by claiming the interest paid on your education loan under Section 80E of the Income Tax Act, 1961.

Is there any tax benefit to availing an education loan in India? ( 

Yes, you can claim a tax benefit on the interest you pay for an education loan in India under Section 80E of the Income Tax Act.

I want to take a higher education loan for my child, who will be studying abroad. Can I get a deduction under section 80E?

Yes, you can claim a deduction under section 80E, even if your child is going abroad for higher education. This applies to both vocational and regular courses.
 

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LoansJagat Team

‘Simplify Finance for Everyone.’ This is the common goal of our team, as we try to explain any topic with relatable examples. From personal to business finance, managing EMIs to becoming debt-free, we do extensive research on each and every parameter, so you don’t have to. Scroll up and have a look at what 15+ years of experience in the BFSI sector looks like.