Now Repayment of the education loan could also be used to claim a deduction from tax payment
Education loans are a convenient and popular option for many, to meet the cost of higher education and can also use it under Section 80E of the Income Tax Act, repayment of this education loan could be used to claim a deduction. Deduction in respect to repayment of education loan. If you have taken an education loan from any financial institution or an approved charitable institution, Section 80E provides a tax deduction on the loan interest that you are paying.
Deduction limit -The entire interest paid on the education loan could be used to claim a deduction. There is no cap on the deduction amount. However, one needs to remember, that there is no tax benefit on the principal repayment of the loan.
Scope of deduction -The loan should be taken for the sole purpose of higher education. It could either be for the individual, spouse or children
From assessment year 2010-11, deduction could be claimed for the student for whom the individual or assesse is the legal guardian. Education loans taken for full time courses only are eligible. Any graduate, or, post-graduate courses in engineering, medicine, management, applied sciences, mathematics or statistics are considered for a deduction. No deduction is available for part-time courses.
Deduction period -The deduction is available for a total of eight years or till the principal and interest amount have been repaid, whichever comes earlier. This eight years would include the year in which the loan repayment starts and seven years following this year. So even if your loan tenure exceeds these eight years, no deductions can be claimed beyond this. The course need not be pursued in India. Loans for overseas courses are also permissible for a deduction. Deduction would be applicable only when the individual starts repaying the loan.
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