High costs of higher education have led many of the younger individuals to opt for education loans. If you are currently paying interest on your education loan, you should be aware of the various tax deductions that you can avail on it under section 80E of the income tax act 1961.
1. The tax benefit is only applicable on interest paid on the loan as part of the EMI. You cannot avail any tax deduction on payment towards the principal amount of the loan.
2. The loan has to be taken for the purpose of higher education from a bank or a qualifying financial institution for self, spouse, child or a student you are the official guardian of.
3. The higher education loan can be for any vocational course or regular course in any field after the completion of senior secondary examination or equivalent level.
4. No limit on the maximum amount that can be deducted.
5. You can claim for deduction on interest paid on loan only from the year your repayment begins. You can claim the deduction for 8 financial years during your income tax returns filing, from the time you start repayment or until the interest is fully paid, whichever comes earlier.