Claiming Tax Benefits on an Education Loan: A Helpful Guide

With a high increase in education costs over the years, affording the fees of reputed institutions can be a challenge. Thankfully, an education loan is a great solution to help address these costs. You can also claim tax benefits on an education loan and save more overall. 

These are available in the form of a deduction on the interest you pay on the loan. The limits, applicability, and other specifications are as per the provisions under Section 80E of the Income Tax Act. Read on to learn how the tax deduction under this section works, who is eligible and more.

Tax Deduction Available on an Education Loan

As mentioned, tax benefits on an education loan in India are available as per the provisions outlined in Section 80E of the Income Tax Act. With this benefit, the authorities aim to promote education. Here’s what you need to know:

• You can claim a deduction for education loans from an eligible financial institution

• The deduction applies only to the interest portion of the EMI you pay during a financial year, not the principal amount

• To claim this deduction, you must obtain a certificate from the financial institution

• The certificate should contain a record of the principal and the interest portions of the education loan you’ve paid during the financial year

Tax Deduction on an Education Loan Under Section 80E: Key Points

Like any other provision related to tax deduction, this section also comes with a set of rules and regulations. Keep these points in mind to successfully claim income tax benefits on an education loan:

Maximum Deduction Amount

The best part about this provision is that there isn’t any limit on the amount you can claim as a deduction. However, remember that you cannot get a deduction on the principal amount of the loan. You can only enjoy this benefit on the interest payments you make in a year towards the repayment of your education loan. 

Individuals Eligible for Deduction

Anyone getting an education loan can claim tax deductions under Section 80E. To benefit from the tax deduction, you must get the education loan for:

• Your own higher education
• The education of your dependent children
• The studies of a student for whom you’re a legal guardian
• The education of your spouse or partner

This is what you can do if your parents took a loan for you and you split the EMI payments:

• Your parents can claim deductions on the portion of the EMI that they’ve paid
• You can get tax benefits on the remaining portion

Time Limit for Claiming Deduction

It’s essential to keep in mind that you can claim tax deductions under this section for whichever of the following options that comes earlier:

• A maximum period of 8 years, starting from your first interest payment
• Until you repay the interest amount

Lenders Eligible to Offer Loans

As per Section 80E, you can claim this tax benefit only when you get an education loan from one of the following eligible institutions:

• Banks
• NBFCs
• Approved charitable organisations

Education Loans Eligible for Deduction

Here are some conditions regarding the loans that you must keep in mind to claim the deductions:

• You must use the funds only for educational purposes in India or abroad
• You must utilise the loan amount to cover the costs of any full-time course after the completion of your senior secondary exams

The tax benefit is also available for courses or degrees in the following fields:

• Medicine
• Engineering
• Management
• Other occupational courses

An alternative option to cover education costs is getting an Instant Personal Loan from Fibe. Since these loans have no end-use restriction, you can employ them for any expense, whether it’s the:

• Tuition fees
• Living expenses
• Getting a laptop or courses materials for classes

We have minimal eligibility requirements and documentation formalities, so can apply easily and get the funds just as quickly. Download the Instant Loan App or apply via the website.

FAQs on Claiming Tax Benefits on an Education Loan

Can I get tax benefits on an education loan?

Yes. you can claim a deduction on the EMI portion of an education loan u/s 80E of the Income Tax Act and lower your tax outgo.

Can I claim benefits under both Sections 80C and 80E?

Yes. Both sections are exclusive of each other and you can enjoy tax income tax benefits on an education loan u/s 80E. Section 80C on the other hand, offers a deduction of up to ₹1.5 lakhs on specified investment and other specified circumstances.

What is the limit of the 80E tax benefit?

There’s no limit. You can claim a deduction for the total interest paid during the financial year. Note that you can only claim the tax benefit on whichever comes earlier:

• A maximum period of 8 years, starting from your first interest payment
• Till you repay the interest amount

How much ITR is required for an education loan?

This depends on the lender you apply with and most issuers need you to submit the last 2 years’ ITR.