Section 80E of Income Tax - Deduction for interest on loan taken for Higher Education

SECTION 80E OF INCOME TAX - DEDUCTION ON INTEREST FOR HIGHER EDUCATION LOAN TAKEN

The income Tax Act provides a deduction for any interest paid on loans taken for Higher Education of Self or relatives.

Section 80E of the Income Tax Act provides the deduction. According to this section, any Individual will be provided a deduction in respect of Interest paid on a loan taken by him for higher Education of himself or his/her relative.

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Conditions for claiming deduction under Section 80E are as under:

The deduction is available up to 8 years i.e. initial assessment year and 7 more assessment years or until the interest is paid off whichever is earlier. The initial assessment will be the year in which the interest is started to be paid.

The deduction is available on any loan taken from a Financial Institution or approved Charitable Institution.

Financial Institution is defined as :

"Financial institution" means a banking company to which the 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 notification in the Official Gazette, specify in this behalf;

Approved Charitable Institution is defined as:

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

The higher education is also defined as:

"Higher education" means any course of study pursued after passing the Senior Secondary Examination or its equivalent from any school, board, or university recognized by the Central Government,State Government or local authority, or by any other authority authorized by the Central Government or State Government or local authority to do so;

Relative is also defined as :

"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.

Thus it is beneficial to take a loan for higher studies of self or spouse or children as the interest is deducted from the total income. There is no restriction on the amount of interest i.e. whole of the interest paid during the year is deducted u/s 80E.

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