Section 80E of Income Tax Act Educational Loan Deduction

Section 80E Income Tax Educational Loan DeductionInterest on Education Loan is covered under section 80E of the Income Tax Act, 1961. Section 80E Deduction is introduced to encourage students to go for higher studies. The Deduction under section 80E is available only for the Interest Component of the Loan, but not available for the Principal Amount. In this Article, we will discuss various issues on Section 80E like Maximum deduction allowed, To whom it is available etc. In our earlier post, we explained important income tax concepts like Section 80TTA deduction, 194A and 80D Deductions.

Background of Section 80E

Indian Education System is still in a backward state and it is a know truth that over 40% Indian graduates don’t have any financial assistance to go for higher studies. The Central Government has recognised that, a country’s development is possible only when young people have access to quality education.

Quality Education is never cheap and requires huge sums of money as college donations and fees. Most students look out for an Educational loan for this.

By making Interest on Educational loan available for Deduction, young Indians can be encouraged to take higher studies loans.

Section 80E Deduction Limit

The entire amount payable as Interest can be availed as a deduction under this section. Such deduction can be claimed for a maximum period of 8 Years.

Does 80E Apply for Abroad Studies

Yes, the section does not make distinction between loan taken for domestic studies and studies abroad. Therefore, even if a loan was taken to study in a foreign country, such interest component can be still claimed as deduction u/s 80E of the Income Tax Act.

Who can claim the deduction?

An individual can get the Tax Deduction benefit if he has taken an education loan for self, his wife, children. Therefore, it is clear that Interest on any education loan taken for siblings or other family members does not get the Section 80E Deduction.

Case Laws Relating to Section 80E

Year Case Law Name
2003 Cit vs Smt. T.C. Usha
1975 CIT Vs Cambay Electric Supply
1986 CIT Vs Canara Workshops
1985 Distributors Vs Union of India
2005 Vahid Paper Converters Vs ITO
2009 CIT Vs Agrawal and Sons

 

Conclusion:

Section 80E is one of the oldest provisions in the Income Tax Act, 1961. The history of this provision dates back to over four decades. It is quite famous among all professionals and bankers. This provision has had some contribution for the overall educational development of the country.

Updated: April 14, 2018 — 5:41 pm
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