Save tax with your study loan: Section 80E deduction of income tax act

Higher studies and education abroad are dreams that many students are keen to pursue as they grow up. However, often it becomes quite taxing for the parents because of the savings that must be kept aside for the dreams to come true. On the other hand, if you are already an earning individual, there is a high possibility you would go for an Education Loan to turn your dream into reality. If you are worried about paying taxes, you must read about 80E deductions. 

Under Section 80E deduction, a higher Education Loan helps save taxes. Interest paid for an Education Loan is allowed as a deduction from the total taxable income. However, the Section 80E deduction doesn’t cover repayment of the principal amount of the Education Loan.

Who can claim Section 80E tax benefits?
 

Section 80E of the Income Tax Act can be claimed only by individual taxpayers. The Education Loan can be taken in your name, your spouse, your children or someone for whom you are the legal guardian. 

What are the benefits of Section 80E deduction?
 

· You can claim the Section 80E income tax benefit against loans from banks, financial institutions and approved charitable institutions. 

· You can claim it for loans taken for higher studies. Higher studies pursued in India and overseas qualify for Section 80E deduction.

· Higher studies include vocational and regular courses after passing the senior secondary exam or an equivalent examination.

· Section 80E deductions are available for a maximum period of 8 years, starting with the year you start the repayment.  

Also read: ​https://www.idfcfirstbank.com/finfirst-blogs/education-loan/documents-required-for-education-loan​​​

Coverage of section 80E

The following factors are considered while calculating the coverage of the Section 80E deduction.

· The interest portion of the Education Loan paid during the financial year is available as a deduction from the total taxable income for the relevant financial year.

· Interest paid during 8 consecutive years is available for claim under section 80E. For instance, if the loan repayment period is 10 years, interest paid during the last two years cannot be claimed as a Section 80E tax benefit. 

· There is no upper limit  On the interest amount that can be claimed for tax waiver under Section 80E benefits

Benefits of taking an Education Loan

Apart from the Section 80E deduction benefits, Education Loans have various other benefits. 

· You should apply for an education loan to avoid disturbing your family savings or liquidating your investments. 

· Unlike other loans, you don’t have to start repaying immediately. The repayment schedule of educational loans generally commences a specific period after completing the studies. 

· Education Loans cover the course fee and incidental expenses like living, travel, and laptop costs, among others.

Also read: ​https://www.idfcfirstbank.com/finfirst-blogs/education-loan/5-common-student-loan-mistakes-to-avoid​​​

Summary

Now higher education is no longer a dream. You can pursue your higher education in India or abroad without worrying about arranging for finances. IDFC FIRST Bank Education Loan helps you fulfil your ambitions at any time. With loans of up to Rs 1 crore for courses as long as five years, you can make the most of the easy finance options and expert guidance provided under IDFC FIRST Bank Education Loans. 

Now, fulfil your dreams and get all the benefits of  section 80E deduction on an Education Loan at the tip of your fingers. 

FAQs

1. Can a Hindu Undivided Family (HUF) claim Section 80E?

No. No other category of taxpayer can claim this deduction except individuals.

2. Can I claim a Section 80E deduction on loans from friends and relatives for higher studies?

No. Only formal loan products from banks, financial institutions and approved charitable institutions are eligible for Section 80E.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.