Education is getting costlier day by day. And if you are thinking of going abroad for further studies, the high fee structure with the cost of living can give you a knock.
However, if you are able to get an education loan, that can make things easy and moreover you can also get a tax deduction benefit while repaying the loan. Section 80E makes it possible for claiming deductions under the I-T Act.
An individual, after passing the senior secondary examination from an authorised college, university of state or central or any local authority and willing to pursue higher education mainly to do graduation or post graduation course in any streams like management, medical, engineering, science, etc. can avail an education loan.
An individual who is opting for higher education can avail the loan. The loan must be sanctioned by any financial institution like banks, charitable institution, etc. However, HUF is not allowed to claim the deductions. Also, a loan taken from any friend or relative, who are not authorised by financial institutions, can’t be claimed for deductions.
There is no limit to claim the amount of interest under the deductions 80E. The deductions are mainly available for a maximum time horizon of successive 8 years or until the time the interest is paid, whichever situations occur earlier of the two. The deductions can be claimed only when you start paying your loan.
To claim the interest, you need to take the statement from your college and submit that to your HR department at the time of declaring your taxes or else you can claim it while filing the income tax return. Principal repayment of the loan is not considered under the deductions 80E. Only the interest which is being charged against the loan is held for deductions under 80E. However, the tuition fee paid towards the education can be claimed as a deduction under section 80C.
Either you or your parents can claim the deductions depending upon who has taken the loan for the full-time education. It is always advisable to claim the deductions within 8 years because this way you can claim all your interest amount under the section mentioned by the I-T Act. Mostly, the amount is claimed after the education is over. You can apply for the repayment of the loan within a year once you are into a job. The repayment of both the principal and interest amount is clubbed together and are turned into monthly EMIs. Most of the time, banks calculate the EMIs for 8 years, but you can get it reduced as per your income-outgo.