Received that acceptance letter from your dream college or university? Great! Now that you’re ready to take your career a notch higher, it’s time to plan to fund your education. Are you planning on taking a Personal Loan to finance your way through college? If yes, you are eligible for deductions under Section 80E of the Income Tax Act.
How do I know if I’m eligible for deductions?
The Section 80E allows for deductions for education loans on fulfillment of the following conditions:
- You have taken the loan either for yourself or your spouse or child. As long as you are the legal guardian of the person who has taken up the loan, you are eligible for deductions.
- You are availing the loan as an individual and not as a company or HUF.
- You are taking the loan to fund higher education.
- You have taken the loan from a charitable or financial institution, and not a relative or employer.
It is important to note that these deductions can only be claimed on the interest portion of your education loan, and not on the principal amount.
Sounds like I tick the boxes. But wouldn’t this be included under Section 80C?
What makes Section 80E attractive is that while under Section 80C you are allowed deductions up to a maximum of ₹1.5 lakh p.a., there is no maximum amount in the case of Section 80E. The amount covered by Section 80E is over and above the amount covered under 80C.
That’s great! Can I avail this benefit for the entire duration of my loan?
Unfortunately, no. This benefit only continues for eight consecutive years, starting from the first year of repayment. Beyond eight years, deductions are not allowed even if the tenor of your loan is greater than eight years. If your repayment period is shorter than eight years, you can enjoy this benefit for the entire duration.
What would I need to submit as proof to to avail of this benefit?
The primary requirement for claiming this deduction is a certificate from the institution granting the loan stating the principal amount and the interest amount. This will have to be submitted as an evidence of interest paid during the year showing a clear distinction between the amount paid towards the principal and interest.
The value of higher education is increasing day by day. It is essential to ensure that nothing hampers your chance to score a good degree, and an education loan takes care of the financial aspect.
Today, it is easier to avail of an education loan than 10 years ago. Personal loan available at affordable interest rates give everyone access to higher quality education and a brighter career. To plan your loan repayments and deductions, a Personal Loan EMI Calculator can prove to be quite beneficial.