Individuals who have availed education loan for higher studies can claim for tax deduction only on the interest amount paid towards the education loan from the total annual income. This facility is not available to the Hindu Undivided Family. The loan can be taken either for self or children or spouse or for a student for whom the individual is a legal guardian. One can avail the interest amount paid towards education loan for deduction for a tenure of eight years only. If the loan extends beyond 8 years, then the assessee cannot claim for deduction. There is no cap on the maximum amount which an individual can claim as a tax deduction under this section.
Eligibility for Tax Deduction – Section 80E
An assessee has to fulfil the following criteria to avail deductions under Section 80E of the Income Tax Act of 1961. They are as follows:
- The deduction can be claimed only on the interest amount paid towards the education loan.
- Only individuals can claim for deduction under this section.
- This section does not avail a Hindu Undivided Family to secure deduction on interest amount paid towards education loan.
- Loans can be taken by an individual for fulfilling the educational requirements of self or spouse or children.
- Loans secured from recognized financial institutions and charitable organizations are eligible for tax deduction.
- If loans are borrowed from friends or relatives then the same is not eligible for the tax deduction
- The loan secured for the educational purpose can be availed for the deduction if it has been borrowed for higher education
- Deduction under this section can be claimed only for 8 years beginning from the repayment from the first year
- An assessee can avail deduction if the loan has been taken under the name of the taxpayer.