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

As students grow up, pursuing higher education and studying abroad often become their aspirations. However, as a parent, it can be a daunting task to set aside the necessary funds to make those dreams a reality. For those who are already earning, opting for an education loan may be the most viable option. However, it is important to also consider the potential tax implications of taking out an education loan. This is where 80E deductions come into play. 

Under the 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 the repayment of the principal amount of the education loan.

Who can claim Section 80E tax benefits?
 

Section 80E of the Income Tax Act 1961 can be claimed only by individual taxpayers. The education loan can be taken for yourself, 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 eight 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 eight consecutive years is available for claim under section 80E. For instance, if the loan repayment period is ten 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.

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. The IDFC FIRST Bank Education Loan helps you fulfil your ambitions anytime. 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 deductions under 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.