Tax Benefit under 80E

Tax Benefit under 80E

• Apart from tuition fees, the loan could cover expenses like hostel charges, library/laboratory fees, travel expenses and passage money for studies abroad.

• The borrower can claim tax exemption on interest paid under Section 80E.

• There is no cap on the amount of interest on which one can claim tax exemption; your entire interest outgo on an education loan is eligible for deduction.

• The tax exemption, though, is not available. For repayment of principal.

• The loan should be taken from a bank, financial institution or a government approved charitable institution for higher studies. Course eligible for he deduction include above Std. 10th, graduation, Post graduation, professional courses and other courses approved by the UGC, the government or the AICTE.

• If you have borrowed Rs 2,00,000 at the rate of 12% per annum for seven years, the total interest paid would be Rs.1,06,776, and the entire amount can be deducted from the total income.

• Interest deduction available on Rs.2Lakh loan borrowed @ 10% as follows:

Year Actual Int.(Repaid(in Rs.)

1 24000
2 21624
3 18960
4 15972
5 12636
6 8892
7 4692
Total 106776

• Entire amount is available as deduction under Section 80E

• The repayment period for the student borrower starts one year after the completion of the course or six months after he/she secures employment, whichever is earlier.

• The tax exemption is allowed for the year start repaying the loan and seven subsequent assessment years.

• If the loan has been taken by the parent or spouse, they can start repayment immediately after the disbursal of the loan and claim exemptions accordingly.