Education plays a significant role in everyone’s life and is one of the costliest aspects among the many others. High cost education does not deter people from studying and aspiring people still go in for higher education. Educated people are pillars of the nation and their knowledge is absolute necessary for able Governance of the society. To encourage more and more people equip themselves with knowledge through studies, Indian Government offers tax benefits on interest paid towards loans obtained for higher education. Let us look at information pertaining to the same in a detailed manner for better understanding and clarity.
Section 80E provides tax relief
Section 80E offers relief to Income Tax Assessees for interest amounts paid towards loan availed for pursuing higher education. This is subject to norms this section lays for students who want to avail Tax benefits.
- Deduction can be claimed for the complete interest portion paid towards Education Loan by the parent who is an Income Tax Assessee
- Interest paid towards Education Loan taken for higher studies of spouse and children is also considered for deduction
- Legal guardians who pay interest for Education Loan taken towards the education of children they bring up can also claim deduction under Section 80E
- Deduction under Section 80E can be claimed for vocational courses students pursue after finishing their schooling as well as full time Graduation or Post Graduation courses in Medicine, Pure Science, Engineering, Statistics, Applied Sciences, Mathematics and Management.
Other salient points that qualify deduction under Section 80E
Certain qualifiers need to be met when it comes to claiming tax deduction under Section 80E. Some such qualifiers are given below for clear understanding of all the Income Tax Assessees.
- Interest paid towards loans taken for post school higher studies from approved financial institutions and Charitable Institutions qualify for deduction
- Loans taken from friends, acquaintances, relatives and individuals is not considered for deduction under Section 80E
- Deduction can be claimed under Section 80E towards interest paid for Education Loans only for 8 years from the date of allotment of loan.
- The interest rate charged on Education Loan by banks during the study period is lower than that post study period
- No ceiling has been set for the interest amount to be paid under Section 80E. This means the complete interest component paid towards Education Loan availed is exempted from tax.
- Payments made towards Education Loan interest must be from the taxable income of the Assessee.
Financial Institutions offer Education Loan to students who pursue higher education after their school studies. Parents must make their children avail Education Loan in their name so they become responsible for the repayment of the same. This will instill the habit of savings in them right from when they draw their first salary from employment. Another benefit in making children avail Education loan on their name is that it will make them study well since they know the cost they are paying towards their education. It offers a dual benefit of psychological and emotional responsibility in students who pay the interest towards their Educational Loan month on month meticulously. This makes him a good citizen enhancing his knowledge in taxation and other aspects.