Deduction u/s 80E: Interest On Loan Taken For Higher Education

In this article we discuss about the deduction u/s 80E of the Income Tax Act, 1961. This  is available to Individual on payment of interest on loan which is taken for higher education from financial institution or approved charitable institution.

Who is eligible to this deduction:-

  • An individual only is eligible for this deduction.
  • An individual can get a loan for own higher education or higher education of his spouse, or children, or the student for which he is the legal guardian.

Amount of Deduction:-

Any amount paid by way of interest on loan taken by him from any financial institution or any approved charitable institution for the purpose of pursuing his higher education or for the purpose of higher education of his relative.

Assessment year upto which an individual can take the benefit of this deduction:-

The deduction shall be allowed in computing the total income:

    • in respect of the initial assessment year and seven assessment years immediately succeeding the initial assessment year or
    • until the interest is paid by the assessee in full,

whichever is earlier.

Approved charitable institution:-

Approved charitable institution means:

  • an institution specified in, or,
  • as the case may be, an institution established for charitable purpose and approved by prescribed authority under clause (23C) of section 10 or
  • an institution referred to in clause (a) of sub-section (2) of section 80G.

Financial institution:-

Financial institution means

  • a banking company to which Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act) or
  • any other financial institution which the Central Government may by way of notification in the Official Gazette, specify in this behalf.

Higher education:-

Higher education means any course of study pursued

  • after passing the Senior Secondary Examination or
  • its equivalent from any school, board or university recognised by the Central Government or State Government or local authority or by any other authority authorised by the Central Government or State Government or local authority to do so.

Initial assessment year:-

Initial assessment year means the assessment year relevant to the previous year, in which the assessee start paying the interest on the loan.

Relative in relation to an individual:–

Relative in relation to an individual means the spouse and children of that individual or the student for whom the individual is the legal guardian.