What is the maximum amount I can claim under Section 80E?

There is no maximum limit on the amount of interest that can be claimed under Section 80E. The entire interest paid during the financial year on the education loan is deductible, providing substantial tax relief for taxpayers with large education loans.

Can I claim Section 80E if I am repaying the loan for my child’s education?

Yes, Section 80E allows the taxpayer to claim the deduction for loans taken for the education of their spouse, children, or any student for whom they are a legal guardian. The key criterion is that the loan must be for higher education and taken from a recognized financial institution.

How long can I claim the Section 80E deduction?

The deduction can be claimed for a maximum of 8 consecutive years, beginning from the year in which the repayment of the loan begins. If the interest is paid for fewer than 8 years, the deduction is allowed only for the years in which interest is actually paid.

Can I claim the deduction for both principal and interest under Section 80E?

No, the deduction is specifically for the interest component of the education loan, not for the principal repayment. Only the interest paid on the loan during the financial year can be claimed under Section 80E.

What types of courses qualify under Section 80E?

The loan must be taken for higher education, which includes undergraduate, postgraduate, professional, and vocational courses. The deduction is available for both full-time and part-time higher education, as long as the course qualifies as higher education.

Do I need to submit any documents to claim Section 80E?

Yes, to claim the deduction, you must submit a certificate from the lender that specifies the interest and principal amounts paid during the financial year. This certificate is essential for verifying the loan details while filing your income tax return (ITR).

Can I claim Section 80E if I have completed my course and the loan is still being repaid?

Yes, Section 80E allows you to claim the deduction as long as you are repaying the loan and paying interest, even if the course is completed. The deduction applies to the interest paid during the financial year, regardless of whether the course is finished.

Is Section 80E available for loans taken for abroad education?

Yes, Section 80E is available for loans taken for higher education both in India and abroad. The eligibility criteria and the deduction process remain the same, regardless of the location of the education.

Does Section 80E apply to loans for part-time education?

Yes, Section 80E applies to loans taken for part-time education as long as the education qualifies as higher education. The course must be beyond the senior secondary level and must be pursued at an institution recognized by the government or a recognized institution abroad.

What should I do if I don’t receive the required certificate from the lender?

If you do not receive the required certificate from your lender, you should contact them immediately and request the certificate. Without this certificate, you will not be able to claim the deduction, as it is essential for providing proof of the interest paid on the loan during the financial year.

Section 80E Eligibility for Education Loan Interest: Complete Guide for FY 2024-25

PRITI SIRDESHMUKH
15 hours ago
8 min read

Section 80E of the Income Tax Act, 1961 is a vital provision for individuals pursuing higher education in India or abroad. It offers a tax deduction on the interest paid on education loans, making it a significant financial relief for taxpayers. With the rising costs of education, this provision can ease the financial burden of both students and their families. The deduction under Section 80E applies specifically to the interest component of the loan and is subject to certain eligibility conditions. By understanding the scope of this deduction, taxpayers can effectively reduce their taxable income and, in turn, their overall tax liability. This section highlights the necessary criteria for eligibility and the way the deduction works, particularly focusing on the changes, if any, in recent fiscal years.

What is Eligibility under Section 80E for Education Loan Interest?
What is Section 80E?
Eligibility Criteria for Section 80E Deduction
Is Section 80E Available Under the New Tax Regime?
How Section 80E Works in the Old Tax Regime
Deduction Amount and Duration
Documentation Required for Claiming Section 80E
Recent Updates and Budget Announcements
Conclusion
FAQs

What is Eligibility under Section 80E for Education Loan Interest?

Section 80E allows individual taxpayers to claim a deduction on the interest paid on loans taken for higher education. This deduction applies only to loans taken from recognized financial institutions, banks, or approved charitable organizations, and is specifically meant for the interest component of the loan. Importantly, there is no upper limit to the amount of interest that can be claimed as a deduction, allowing taxpayers to benefit from the full interest paid on the loan during the financial year. This benefit is available for a maximum period of 8 consecutive years, beginning from the year in which the loan repayment starts. However, the deduction is applicable only under the old tax regime and is not available for those who choose the new tax regime. Additionally, loans from family members or friends do not qualify for this deduction, ensuring that only formal educational loans are eligible for the benefit.

What is Section 80E?

Section 80E of the Income Tax Act, 1961 provides a tax deduction on the interest paid on loans taken for higher education. The deduction is available to individual taxpayers who have borrowed money from a recognized financial institution, bank, or approved charitable organization. Importantly, this deduction is applicable only on the interest component of the loan and not the principal repayment. The deduction can be claimed by the taxpayer for the interest paid during the financial year on loans taken for pursuing higher education, either within India or abroad.

This section specifically aims to support taxpayers who invest in their educational future or that of their family members. Higher education under this provision includes graduate, postgraduate, professional, and vocational courses. By reducing the taxable income, Section 80E effectively lowers the overall tax liability, making it a valuable provision for taxpayers with ongoing education loans.

Eligibility Criteria for Section 80E Deduction

To claim the deduction under Section 80E, several conditions must be met. These include:

Loan Source: The loan must be taken from a recognized financial institution, a bank, or an approved charitable organization. Loans taken from friends, family, or any non-recognized sources are not eligible.
Purpose of Loan: The loan must be taken for pursuing higher education, which includes studies beyond senior secondary school. This includes undergraduate, postgraduate, professional, and vocational courses.
Eligible Borrowers: The deduction is available only to individual taxpayers. It cannot be claimed by Hindu Undivided Families (HUFs), companies, or any other entities.
Beneficiaries: The loan can be taken for the education of the taxpayer, their spouse, children, or any other student for whom the taxpayer is a legal guardian. This ensures that the taxpayer can claim the deduction for loans taken for family members' education as well.
Tax Regime: The deduction under Section 80E is available only if the taxpayer opts for the old tax regime. It is not available for those who choose the new tax regime, which does not allow most exemptions and deductions, including Section 80E.

Is Section 80E Available Under the New Tax Regime?

Section 80E is only applicable under the old tax regime. If a taxpayer chooses to file under the new tax regime, they are not eligible to claim this deduction. The new tax regime, which came into effect in the Financial Year 2020-21, offers lower tax rates but removes most exemptions, deductions, and rebates, including those under Section 80E.

The old tax regime, on the other hand, allows taxpayers to avail various exemptions and deductions, such as those under Section 80C, Section 80E, and other applicable provisions. As a result, taxpayers who have ongoing education loans will benefit more from the old tax regime if they are looking to claim the Section 80E deduction for the interest paid on those loans.

How Section 80E Works in the Old Tax Regime

In the old tax regime, Section 80E provides a tax deduction on the interest paid on an education loan. Here's how it works:

Eligibility: As long as the taxpayer is repaying the interest on a loan taken for higher education, they are eligible to claim the deduction. The loan can be for the taxpayer, their spouse, children, or any other student for whom they are the legal guardian.
Deduction Amount: There is no maximum cap on the amount of interest that can be claimed. The entire interest paid during the financial year is deductible from the taxpayer’s taxable income, which reduces the overall tax liability.
Duration: The deduction can be claimed for a maximum of 8 consecutive years, beginning from the year in which the repayment of the loan starts. However, if the interest is paid for fewer than 8 years, the deduction is only available for the years in which interest payments are made.

For example, if the loan repayment begins in FY 2022-23, the taxpayer can claim the deduction for interest paid in this year and for the next seven years, provided the loan is still active.

Deduction Amount and Duration

No Upper Limit on Interest: There is no upper limit on the amount of interest that can be claimed under Section 80E. This is a significant advantage for taxpayers who have large education loans and are paying substantial interest. The entire interest paid in the financial year is deductible.
Duration of the Deduction: The deduction is available for a maximum of 8 consecutive years starting from the year the repayment of the loan begins. If the loan is repaid in less than 8 years, the deduction is available for the years in which interest is paid. Importantly, if the taxpayer continues repaying the loan after 8 years, they can no longer claim the deduction.
Interest Paid during Financial Year: The deduction is available for the interest paid during the financial year (April to March). This means taxpayers can claim the deduction for the actual interest paid during the year, which is reflected in the loan repayment certificate provided by the lending institution.

Documentation Required for Claiming Section 80E

To claim the Section 80E deduction, the taxpayer must obtain a certificate from the financial institution or the approved charitable organization that issued the loan. The certificate should specify the following:

The interest and principal amounts paid during the financial year
The loan account number
The name of the borrower

This certificate serves as proof for the taxpayer when filing their income tax return (ITR). It is essential to retain this document for the ITR filing process, as it validates the deduction claim.

The certificate must be obtained annually, as the interest amount may change year to year based on the outstanding loan balance.

Recent Updates and Budget Announcements (FY 2024-25 & FY 2025-26)

As of the Union Budget for FY 2025-26, there have been no changes to the provisions of Section 80E of the Income Tax Act, 1961. The eligibility criteria, deduction limits, and duration remain consistent with previous years. The deduction continues to be available only under the old tax regime and is not extended to the new tax regime, which does not allow most exemptions and deductions, including Section 80E.

Additionally, the Union Budget 2025-26 introduced revised Tax Collected at Source (TCS) rates on foreign remittances, providing relief to Indian students funding overseas education through loans or personal savings. These changes aim to reduce the tax burden on international education expenses, making them more financially accessible.

However, it's important to note that these TCS revisions are separate from Section 80E and do not affect the eligibility or benefits under the education loan interest deduction.

Conclusion

Section 80E provides a substantial tax benefit for taxpayers with education loans, especially those paying significant interest on loans taken for higher education. The key to maximizing this benefit is understanding the eligibility requirements, the scope of the deduction, and the tax regime under which it applies. By claiming the full interest paid on the loan, taxpayers can reduce their taxable income and, ultimately, their tax liability. Although the provision has not changed in recent budgets, it remains an essential tool for those pursuing or supporting higher education.

FAQs

What is the maximum amount I can claim under Section 80E?
There is no maximum limit on the amount of interest that can be claimed under Section 80E. The entire interest paid during the financial year on the education loan is deductible, providing substantial tax relief for taxpayers with large education loans.
Can I claim Section 80E if I am repaying the loan for my child’s education?
Yes, Section 80E allows the taxpayer to claim the deduction for loans taken for the education of their spouse, children, or any student for whom they are a legal guardian. The key criterion is that the loan must be for higher education and taken from a recognized financial institution.
How long can I claim the Section 80E deduction?
The deduction can be claimed for a maximum of 8 consecutive years, beginning from the year in which the repayment of the loan begins. If the interest is paid for fewer than 8 years, the deduction is allowed only for the years in which interest is actually paid.
Is the deduction available for loans taken from friends or family?
No, the deduction under Section 80E is available only for loans taken from recognized financial institutions, banks, or approved charitable organizations. Loans taken from friends, relatives, or non-recognized sources do not qualify for this deduction.
Is Section 80E available under the new tax regime?
No, Section 80E is available only under the old tax regime. If the taxpayer opts for the new tax regime, which offers lower tax rates but removes most deductions and exemptions, they cannot claim the deduction for education loan interest under Section 80E.
Can I claim the deduction for both principal and interest under Section 80E?
No, the deduction is specifically for the interest component of the education loan, not for the principal repayment. Only the interest paid on the loan during the financial year can be claimed under Section 80E.
What types of courses qualify under Section 80E?
The loan must be taken for higher education, which includes undergraduate, postgraduate, professional, and vocational courses. The deduction is available for both full-time and part-time higher education, as long as the course qualifies as higher education.
Do I need to submit any documents to claim Section 80E?
Yes, to claim the deduction, you must submit a certificate from the lender that specifies the interest and principal amounts paid during the financial year. This certificate is essential for verifying the loan details while filing your income tax return (ITR).
Can I claim Section 80E if I have completed my course and the loan is still being repaid?
Yes, Section 80E allows you to claim the deduction as long as you are repaying the loan and paying interest, even if the course is completed. The deduction applies to the interest paid during the financial year, regardless of whether the course is finished.
Is Section 80E available for loans taken for abroad education?
Yes, Section 80E is available for loans taken for higher education both in India and abroad. The eligibility criteria and the deduction process remain the same, regardless of the location of the education.
Does Section 80E apply to loans for part-time education?
Yes, Section 80E applies to loans taken for part-time education as long as the education qualifies as higher education. The course must be beyond the senior secondary level and must be pursued at an institution recognized by the government or a recognized institution abroad.
What should I do if I don’t receive the required certificate from the lender?
If you do not receive the required certificate from your lender, you should contact them immediately and request the certificate. Without this certificate, you will not be able to claim the deduction, as it is essential for providing proof of the interest paid on the loan during the financial year.