Under section 80E of Indian Income Tax, any interest paid on loan taken from any financial institution or any approved charitable trust for higher education is exempt from taxable income.
The loan can be taken for himself/herself or for any relative’s higher education.
This type of deduction is allowed to Individual assessee only.
Higher education means any course which is pursued after passing the Senior Secondary Examination or its equivalent from any Government recognized school, board or any university.
Meaning of relative for this purpose is the spouse any children of the individual assessee or the student for whom such individual is legal guardian.
The assessee can avail the deduction against interest of loan taken for above mentioned education purpose without any limit out of taxable income.
Deduction of interest is allowed for a maximum period of 8 years which shall begin from the year in which payment of interest on loan begins or till the interest is paid in full, whichever is earlier.
For example Mr. X took loan for the study of his son in financial year 2016-17 and he started to pay the interest on loan in the same financial year i.e. 2016-17, in this case he can claim the amount of interest till financial year 2024-25. Suppose, Mr. X returns the complete loan in financial year 2018-19 then he can claim interest on loan till financial year 2018-19. On the contrary, if Mr. X is not able to repay the loan till financial year 2024-25 the no deduction will be allowed from his taxable income after financial 2024-25.
- Learn Accounting, Free Accounting Tips
- General Accounting Terms
- General Tips Relating to Indian Income Tax Act
- Free Tally Learning
- General Tips Relating to Sales Tax-VAT