Section 80E: Tax* Exemption on Interest on Education Loan

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Section 80E Tax Exemption on Interest on
Education Loan
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The Indian education industry is expected to be
worth US144 billion.  The sector has
consistently emphasized the significance of basic
and higher education for economic development.
India has the advantage of having one of the
largest youth populations, combined with a large
number of educational institutes and schools. But
educational expenses are one of the liabilities
that must be accounted for. With the expansion of
the Indian economy and rise in income levels,
education spending has increased as well,
accounting for the second-largest share of
wallets for middle-class households in the
country. An education loan can help you save on
income taxes. Under section 80E of the IT Act,
you can deduct interest paid on a loan taken for
higher education from your taxable
income. Section 80E allows a deduction for the
total interest amount of the EMI paid during the
fiscal year. To pursue higher education, a loan
must be obtained from a bank or financial
institution. The bank must issue a certificate
detailing the principal and interest amounts paid
on the education loan during the fiscal year.
This is due to the fact that no deduction is
allowed for principal repayment.
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Amount deducted under Section 80E The amount of
interest paid during the fiscal year is
deductible from taxable income. The amount of
the deduction is not limited. The deduction
benefit is available for up to 8 years or until
the interest is paid, whichever comes first. It
applies even if you have taken out an education
loan for your spouse, children, or a student over
whom you have legal custody. To maximize the
benefit of section 80E, it is best to repay the
higher education loan within the next 8 years.
Parents can use this section to provide their
children with the best opportunities for higher
education. They can also claim the deduction
under section 80E if they want to send their
children abroad for studies and take out a loan
to finance it. The deduction is appropriate to
all courses taken after the senior secondary
examination or equivalent, and they must be from
a government-recognized school/institute/universit
y. Take a look at one example to see how the
section 80E deduction aided Rahul. Rahul is a
well-paid IT executive who lives in Mumbai with
his family. His 19-year-old son, Ketan, is eager
to study engineering at one of the country's
prestigious universities. Rahul took out a
10-lakh education loan to cover Ketan's college
fees for four years. Ketan is a happy college
student with a promising career ahead of him.
Rahul has taken the loan for a period of six
years, during which time he can deduct
the interest on the education loan for higher
education under section 80E.
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Who is eligible for this deduction? This
deduction is only available to individuals. It
does not apply to HUFs or any other type of
taxpayer. The loan should be taken out for the
individual's own, spouse's, or children's higher
education, or for a student for whom the
individual is the legal guardian. This deduction
is easily claimed by parents for loans taken out
for their children's higher education. Where can
I apply for this loan? The loan should be
obtained from any bank or financial institution,
as well as any approved charitable organization.
This deduction does not apply to loans obtained
from friends or family.
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The loan's objective The loan should be used to
further one's education. It makes no difference
whether the education loan is used for higher
education in India or elsewhere Higher education
encompasses all fields of study pursued following
the completion of the senior secondary
examination or its equivalent. It offers both
vocational and regular courses. An education loan
indirectly aids in career development by funding
critical years of education. If you have an
education loan and are in the process of repaying
it, you can take advantage of the Section 80E
tax break. This way, you can save money while
progressing toward a successful career. When
education is becoming more expensive and it
remains a dream for many to continue studying
after high school, tax deduction sections such
as 80E have been indirectly supporting many such
dreams.
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