Education plays an essential role in all societies’ economic development. Whereas public funding for primary and secondary education is universally recognized, public funding for higher education in developing countries such as India cannot be achieved. Check Education Loan Tax Deduction Benefits below.
Given the increased cost of higher research, we eventually expend substantial money on the same. You can claim a deduction under Article 80E of the Income Tax Act 1961, specifically relating to educational loans, if you intend to take a loan to undertake higher education in India or foreign countries.
In foreign colleges, the expenditures for students studying overseas are higher than those in India. In addition to the large tutorial fee for a lesson, the individual shall bear travel expenses, lodging charges, compulsory equipment for learning materials such as laptop and mobile.
Also, Check – SBI Education Loan Eligibility
Section 80E: Income Tax Deduction for Education Loan:
Section 80E has therefore been adopted to provide consumers with a cut in high education rates and must make use of grants to cover such expenditures.
Recognizing the importance of higher learning and the position of institutional financing in dealing with increasing higher education costs, the lawmakers were able to deduct tax on training loans according to Section 80E.
The goal was for the educational lenders to reduce their interest burden by way of tax incentives. However, the lenders must satisfy some conditions in order to obtain the exemption from tax.
- The loan should be obtained from a bank or an eligible higher-education institution by itself, spouse or children or by the borrower to whom the individual is legal guardian to demand a deduction.
- After passing a secondary examination or its equivalent test, higher education can be in any field. It contains all technical and standard courses
- The exclusion is only allowed for the total interest portion charged by the EMI during the fiscal year. For the principal repayment, no tax benefit is allowed.
- The maximum amount permitted as a deduction is not limited.
- The interest deduction on the debt ends with the year of recovery, just eight years, or until the principal is fully reimbursed, as before. Education loans can last up to fifteen years. The tax deduction may be paid from the year on which the repayment period begins.
Not all education loans qualify for tax deduction:
The benefit under Section 80E is only applicable for education loans issued by banks, financial institutions informed under the Income Tax Act and registered charitable bodies. The sum lent by family members or friends for higher education cannot be excluded taxably.
Must Read – Top Tax Exemption on Car Loans to Know
Similarly, NBFC education loans will not all be liable for the deduction of taxes. For the benefit of the educational loan taxation exclusion, only those educational credit from a non-bank financial company (NBFCs) approved by the central government through its official Gazette may apply.
This is particularly relevant because banks are being more and more careful regarding educational loans because of the growing inefficiency of the sector. As the NBFCs are trying to fill this gap, it can be relatively easy for students to obtain education loans from the NBFCs. And ensure that you do not skip a tax deduction under Section 80E later, see if the NBFC was informed by the official Gazette as such.
I am Arjun Kumar. I am the owner and administrator of Finance Gradeup. I have completed my education in Arts & Technology. Arjun Kumar usually has interests in playing games, reading and writing. He was a brilliant student during his college days. He also works for many private companies, but the main interest of Arjun Kumar is digital marketing. He thinks that reading is a must before providing any quality information to his readers. You can find Arjun Kumar on much social media handles online, or you can learn more about him in about us page.