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If a person takes education loan,he has to repay both principal and interest.

This deduction is only for Interest repayment

 

Deduction available in 8 years starting with the year repayment of Interest starts

 

Suppose loan taken on 1.6.2012 but  Repayment starts from 1.6.2014

Then deduction will start from Financial Year 2014-15 onwards till  2021-22

Suppose in 2014-15,Rs 100000 Total amount repaid (60000 Principal +40000 Interest),then Deduction is available in Section 80E  only of Rs 40000

 

 

(1) This deduction is for Interest paid on

      Education loan

            for

      Higher education

 

(2)

Higher education means any coursepursued

after passing Senior Secondary Examination (Class XII)

 of any board or similar by  CG /SG /approved authority.

 

 

(3)This loan may be taken for EDUCATION OF

     (a) Assessee himself

     (b)or Relative (Relative means children,spouse,legal guardian)

It doesnt matter whether relative is dependent or not 

 

(3)  Deduction is only for Individual (Not for Others like HUF)

 

4) Loan must be taken from

     (a) Any financial institution (bank etc.)

     (b) Any charitable institution (approved)

 

5) This interest must be paid from his income chargeable to tax otherwise deduction not available

 

EXAM QUESTIONS 

Q1

Mr. B has taken three education loans on April 1, 2015, the details of which are given below:

ParticularsLoan 1Loan 2Loan 3
For whose education loan was takenB

Son 

of B

Daughter 

of  B

Purpose of loanMBAB. Sc.B.A.
Amount of loan 5,00,0002,00,0004,00,000
Annual repayment of loan1,00,00040,00080,000
Annual repayment of interest20,00010,00018,000

Compute the amount deductible under section 80E for the A.Y. 2016-17.

-a-

All 3 loans are eligible for deduction

Deduction is only for Interest amount i.e. 20000+10000+18000=48000

-ea-

Q2

During the financial year 2015-16, Amit paid interest on loan availed by him for his son's higher education. His son is already employed in  a firm.

Will Mr.  Amit  will get the deduction under section 80E.

-a-

Yes

Son is covered in definition of relative.

it does not matter whether son is dependant or not

-ea-

  1. Income Tax
  2. Deductions Under Chapter VIA
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CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 6 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com.
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