How to avail tax benefits on Education loan | Fusion - WeRIndia

How to avail tax benefits on Education loan

How to avail tax benefits on Education loan

Now a days, it is very difficult to pursue higher education without financial help due to the high cost of education. In this scenario, many people are opting for education loans for their higher studies in India or in abroad. The interest rates may vary with different banks, yet girls can obtain for lower interest rates than boys.

The education loan can be repaid from your job. You can get tax benefits on this loan under section 80E. Here are certain points to keep in mind while availing tax benefits on education loan.

Tax deduction is allowed only on the repayment of interest but not on the principal amount of loan.

You can claim the tax deduction when the loan is taken on your name. If the loan is taken on your parents’ name or spouse’s name you cannot claim for a deduction.

The individual who takes education loan on behalf of his children or spouse for whom he is the legal guardian, then he can claim the deduction.

To avail tax deductions, the education loan must be taken for higher studies. According to the Income Tax Act, higher studies means the study pursued after passing the senior secondary examination.

The loan taken for part-time courses is not eligible for tax deductions. The loan must be obtained from approved financial institution. Otherwise, you cannot claim for a tax deduction.

The deductions are allowed continuously for a period of eight years beginning from the first assessment year. In other words, you can start claiming the deduction when you start repaying the interest which is followed by seven years or till the interest is repaid in full whichever is earlier.

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