Section 80E of the Income Tax Act: Save Taxes While Funding Higher Education

Section 80E of the Income Tax Act: Save Taxes While Funding Higher Education

In today’s world, pursuing higher education—especially in fields like medicine, management, or studying abroad—comes with a hefty price tag. Most students or their families opt for education loans to manage the financial load.

But here’s the good news: the government recognises this burden & allows you to claim relief. That’s where Section 80E of the Income Tax Act steps in.

This section specifically provides tax deductions on the interest of an education loan, helping ease the cost of education through smart tax planning.

📘 What is Section 80E of the Income Tax Act?

Section 80E offers a deduction in respect of interest on a loan taken for higher education. If you or your dependent took a loan to pursue education after the senior secondary level, the interest component of that loan is eligible for deduction.

This is not a one-time benefit. You can claim it for up to 8 years from the year you start repaying the interest.

Let’s clarify one thing: this deduction is only for the interest, not the principal repayment. "

🧑‍🎓 Who Can Claim It?

This benefit is open to:

• Individual taxpayers (not companies or HUFs)
• People who have taken a loan from a financial institution or an approved charitable trust
• Education loan taken for self, spouse, children, or a legal guardian for whom you're responsible

So yes, if you're a parent funding your child’s MBA abroad, you qualify. "

✅ Conditions for Claiming the Deduction

Here’s a quick checklist:

• The loan must be for higher education (any study after Class 12)
• It must be from a recognised financial institution or bank
• The loan must be used for tuition, hostel, books, & other expenses related to education
• The deduction is allowed only for interest paid, & not for principal repayment

And remember, you can claim a deduction of interest paid on a loan taken for pursuing higher education for up to 8 assessment years—or until the interest is fully paid, whichever is earlier.

🧾 Example to Understand How Section 80E Helps

Let’s say Priya took an education loan of ₹10 lakhs for her Master’s in Data Science. She pays ₹1.2 lakh per year as interest.

She can deduct ₹1.2 lakh every year for 8 years, reducing her taxable income by that amount.

This could save her roughly ₹36,000 in taxes each year, depending on her slab. Over 8 years, that’s nearly ₹3 lakhs saved—just for something she had to pay anyway!

📌 Section 80E in Simple Terms

Still wondering what makes Section 80E so special?

• No upper limit on the deduction amount
• Helps during the early years of your career or after investing in your child’s education
• Encourages people to pursue quality education without worrying about the tax load
• Simple to claim—just declare the interest amount & keep the loan documents ready

It’s a win-win.

💬 Common Doubts Answered

1. Can I claim a deduction on an education loan for studying abroad?
   Yes! Section 80E covers both domestic & international higher education.
2. Can I claim 80C and 80E together?
   Yes. They are separate deductions. While 80C covers investments like LIC, PPF, etc., 80E is purely for education loan interest.
3. Can both husband and wife claim 80E if both pay the loan?
   Only the person who is repaying & in whose name the loan is taken can claim the benefit.

🔎 Section 80E in Hindi (Quick Reference)

For those searching section 80E of income tax act in Hindi:

“अगर आपने उच्च शिक्षा के लिए शिक्षा ऋण लिया है और उस पर ब्याज चुका रहे हैं, तो आयकर अधिनियम की धारा 80ई के तहत आप उस ब्याज पर टैक्स छूट का लाभ उठा सकते हैं। यह छूट अधिकतम 8 वर्षों तक या ब्याज चुकता होने तक मिलती है।”

📄 Documents Required to Claim Section 80E Deduction

Make sure you have:

• Loan sanction letter from the bank
• Interest payment certificate
• Proof that the loan was used only for educational purposes

You don’t need to submit these while filing, but they must be retained in case the Income Tax Department asks for it.

💡 Why You Shouldn’t Miss Claiming Section 80E

Here’s the thing—this deduction is over and above the ₹1.5 lakh limit under 80C.

That means it gives you extra room to save without adjusting your other investments like ELSS, PPF, or insurance premiums.

If your education loan EMI is eating into your salary, at least let the interest save you some tax!

📢 Final Words

If you’ve taken an education loan, make sure you're not missing out on this opportunity. Section 80E of the Income Tax Act provides tax deductions on the interest of an education loan, & it’s one of the smartest ways to reduce your tax bill while funding your (or your family’s) future.

Smart students not only pass exams—they also pass up tax burdens.

💬 Got questions about Section 80E or educational loans?
Drop a comment or reach out to CallMyCA to help you claim it right, without errors or missed savings.