Education loan is not only beneficial to pursue higher studies but also one can avail tax benefit under 80E of Income tax act. Only an individual is eligible for tax deduction not a Hindu Undivided Family.
Education loan can be availed for spouse, children and yourself. Loan can be availed to study in India as well as in abroad.
An individual can claim deduction on the interest on loan taken by him from any financial institution or any approved charitable institution for the purpose of pursuing his higher education.
"Higher education" means full-time studies for any graduate or post-graduate course in engineering, medicine, management or for post-graduate course in applied sciences or pure sciences including mathe-matics and statistics.
Things to keep in mind before availing loan
- Here, you get a deduction for the interest paid during the year for that particular year. Tax benefit is only for interest paid not on the principal amount.
- Tax benefit can be availed only for 8 years from the date you start your first installment. After 8 years you will not be eligible for further tax benefit. So, it is better to repay before 8 years.
- Loan should be availed from financial institution or any approved charitable institution.
- The amount taken from relatives or friends will not be eligible for 80E under Income Tax Act.
- Only full-time courses are eligible for tax benefit.
- Education loans taken for both regular as well as professional courses pursued after passing the senior secondary examination are eligible.