Does education loan reduce my income tax?

by Arjun Pal Student

The main purpose of an education loan is to help you get the money that aids you in pursuing studies outside India or enrolling in a program where you otherwise would not be able to because of the expenses. However, apart from that, these loans can help you save quite a lot of money as well on taxes. If you have taken such a loan you must be paying back interest as well. This interest would be deducted from your taxable income or from that of the person who has taken the loan on your behalf and is paying it back. This benefit is offered by Section 80E of the Income Tax Act.

 

However, please remember that the tax benefit would be provided only for the interest part of the loan repayment. You would not get the benefit for the principal part of your EMI (equated monthly instalment). 

 

Who can claim the deduction?

 

This particular tax benefit on education loan can be claimed only by the individual taxpayers. No other category of the taxpayer – such as a HUF (Hindu undivided family) can claim this benefit. The person who has availed of the loan must have taken it for themselves, their spouses, or their kids. They may also take it for their students but only in cases where they have legal guardianship of the individual in question.     

 

This means that you can get the loan as a parent rather easily for funding the higher education of your children. 

 

Where can you take the loan?

 

You must always take the study loan from a bank or financial institution such as Axis Bank. Other than these you can get these loans from charitable institutions. However, they must have the necessary approval from the government to offer such a loan. If you take this loan from your relatives or friends, you would not be regarded as being eligible for the deduction.  

 

The aim of such a loan 

 

The loan must have been taken only for educational purposes. In this case, the location of the educational centre is not important at all. It could be within India or outside it as well. The term higher studies in this context include every field of study that you may pursue after having passed your higher secondary examination or any other exam that is equivalent to the same. This means that you can take up a regular course or a vocational program if you want to. 

 

 

 

 

     

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Created on Oct 1st 2021 05:50. Viewed 142 times.

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