Thursday, January 26, 2012

Higher Education Loan Deduction 80E on son's/dependent eduction.


on Thursday, January 26, 2012

In This post we will discuss issue relating to deduction u/s 80E for eduction loan for higher studies.We will try to cover all point relating to eduction loan ,but if any left or you have a different opinion than us ,you can record it in comment section given below.


relevant clause of section are reproduced hereunder for ready reference :


80E. (1) In computing the total income of an assessee, being an individual, there shall be deducted, in accordance with and subject to the provisions of this section, any amount paid by him in the previous year, out of his income chargeable to tax, 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.

from above main points to avail the deduction are
  1. Eduction loan should be taken by Assessee.
  2. The amount eligible for deduction is repayment of eduction loan interest.
  3. There is no limit for amount of repayment of interest.Unlimited amount of interest can be deducted under this section.
  4. This deduction is available 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.
  5. Initial Assessment year means previous year in which assessee starts paying the interest amount.
  6. The loan should be taken for the purpose of higher eduction,and higher eduction 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;
    1. The loan should be taken from any financial institution or any approved charitable institution.(in simple main Banks are covered)
    2. The loan should be taken for higher study of himself or studies of relative
    3. Relative under this section means the in relation to an individual, means the spouse and children of that individual the student for whom the individual is the legal guardian.
    4. Earlier to previous year 2006-07 the above deduction is available for loan taken and repaid by the assessee himself for his studies only but after finance act 2007 ,"the deduction is available for the purpose of higher education of his relative also.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.
    5. There is no deduction available for repayment of principal ,this deduction is available to only for interest repayment.
    6. This deduction is available for individual only and not for other type of assessee .
    7. The loan should be for pursuing higher studies means loans taken not only for tuition or college fees but also loan taken  other incidental expenses for pursuing such studies like hostel charges,transport charges etc etc is also covered under this deduction,
    8. There is no condition that the course should be in India .
    9. 80 E (deduction on Interest on study loan) was available to parents and person himself but now after finance act 2009(2) it is  available to Legal guardian also.
    Updated section is given below for ready reference
    [Deduction in respect of interest on loan taken for higher education.

    80E. (1) In computing the total income of an assessee, being an individual, there shall be deducted, in accordance with and subject to the provisions of this section, any amount paid by him in the previous year, out of his income chargeable to tax, 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.

    (2) The deduction specified in sub-section (1) 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 referred to in sub-section (1) is paid by the assessee in full, whichever is earlier.

    (3) For the purposes of this section,—

    (a) “approved charitable institution” means an institution specified in, or, as the case may be, an institution established for charitable purposes and 88[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;

    (b) “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 Gazette89, specify in this behalf;

    (c) “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

    (d) “initial assessment year” means the assessment year relevant to the pre-vious year, in which the assessee starts paying the interest on the loan;]

    (e) “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.]
    please read some hypothetical examples for clarification.


    Qus: Ram has taken a Eduction loan for his higher studies on 20.06.2010 and started paying installments including interest from 20.06.2011.



    Ans:In above example Ram will get tax benefit under section 8o E from p.y 2011-12 i.e initial year of payment and next seven year i.e upto previous year 2018-19 or upto full payment of loan which ever is earlier.


    Ques:Ram has taken a loan for his higher studies on 20.06.2011 and paid 20000 interest in previous year and his father has paid 15000 interest payment in previous year 2011-12.who can claim benefit of deduction.


    Ans:Only ram will be eligible for deduction of 20000 rs .His father is not eligible for deduction the reason behind this is that loan has been taken by the Ram and not by his father as mentioned in point one above ,though his father is satisfy the condition of relative and paid the interest also but he has not taken the loan


    Ques:Can son /daughter can claim the benefit of deduction for loan taken for higher studies of his /her father/mother.


    Ans: No,on the reverse ,parents can claim the benefit for payment of interest for higher studies of their children.

    Ques:Ram has taken a loan for his higher studies ,and has repaid the laon interest amount but unfortunately he has not succeeded in exams and could not complete his higher studies.

    Ans:As per section loan should be for "pursuing his higher education or for the purpose of higher education of his relative"and ram has pursued the higher course so he should be eligible for the deduction as he has fulfilled all the conditions and there is no condition that the course assessee has persuaded should b completed or assessee should be passed definitely in the course the main dedmand of the section is purpose of the loan should be higher eduction and it should be drawn and used for the purpose of higher studies for his or his relatives.


    .
    Qus:An educational loan was taken four years back by a student . The next year a sum of Rs.4000/= was paid to the bank by way of interest. Nothing was paid there after till current year.

    Now in the current year student paid a sum of Rs.40000/= to the bank towards interest. The interest accrued for the current year is Rs.13,000/= only. The rest of interest accrued for the previous years. On what amount can he/she claim the exemption:-

    a. on the whole amount of Rs.40000/- or
    b. on the interest payable for the current year only i.e. Rs.13,000/=

    Ans:80 E deduction is available on payment basis ,in present case 40000 is allowed as per section 80E

    please comment

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    1. my son taken education loan. i am the guarantor of the loan. whether i am eligible for 80E relief for the payment of interest for education loan. kindly clarify.

      ReplyDelete
      Replies
      1. In our opinion you can not claim 80E as the loan must be on your name

        Delete
      2. You can actually claim it as the name of the guarantor appears on the papers given by bank as well.

        Delete
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        Delete
    2. My wife and I both take loan jointly for further studies of son. During the year, we pay Rs 10,000 as interest to bank. Both can claim Rs 5,000 each deduction u/s 80-E?

      ReplyDelete
      Replies
      1. yes ,amount has been paid by both of you then you can claim 5000 each.

        Delete
    3. I am Mehul i have taken education loan on year 2006-07 and start paying interest on 2009-10 year and still also paying , how will i get advantage of 80E, please guide me some procedure for it.

      ReplyDelete
      Replies
      1. You can deduct amount of interest paid from your income under section 80E in income tax return without any limit. No maximum restriction placed.

        Delete
    4. I am Vishal. I am paying interest for my brother's education loan. Can i claim 80E?

      ReplyDelete
      Replies
      1. If you are legal guardian of Your brother then you can claim deduction u/s 80E

        Delete
    5. Hello,
      I took an education loan of Rs.1,25,000/- in installments from Dec,2008 to Feb,2010 (in each semester) for persuing my M.Tech and started paying interest for the loan amount from the next month (i.e., Jan, 2009). After completion my M.Tech in July-2010, I have joined in the job and started paying an EMI of Rs.5,000/- till now which includes Principal amount and interest. But the real issue is that i don't know about tax benefit of education loan till today, now i want to claim and get refund for the last 2 years. Is this possible?

      ReplyDelete
    6. I am repaying a education loan barrowed my wife before my marriage. At the time of our marriage she has completed the B.Tech degree but the repayment started only after our marriage. In this case can I claim exemptions under 80E? (Note: She was not my dependant when she barrowed the loan/completed the course)

      ReplyDelete
      Replies
      1. No , you can not .

        Not being it had been taken by your wife before marriage but the reason is that 80E benefit is available only to the person who has taken the loan .

        In present case loan is taken by your wife so she can only claim the deduction ,if she paid the same .

        Delete
    7. Hi, I work in a PSU Bank. I had taken an Education Loan for my only Son. My Son completed his Graduation (B.Tech) during December 2011. In the month of March 2012, my Son took up a Job with a monthly salary of Rs.10,000/-. The Repayment started during April 2012. I am paying an EMI of Rs.8000 per month because I don’ t want my Son to reel under financial burden. However, my Son quit the job after 3 months i.e., during June 2012 to pursue higher studies. However, I am continuing to make EMI payments towards education loan from my Salary. I tried to offer the same to my employer/bank to consider it as deduction under section 80E. But, my employer refuses to consider it citing invalid deduction. My query is whether I am entitled to claim Education Loan rebate u/s 80E which I had taken for my Son because I am genuinely paying the same from my salary ? (No Father would want his child to start his career with a pile of debt.)

      ReplyDelete
      Replies
      1. yes , you are 100 % eligible to claim the deduction u/s 80E . But deduction is restricted to interest paid part only.

        pls confirm the reason why they say that deduction is not allowed to you ?

        Delete
      2. The Education Loan is in the name of my Son, because he is the student and I am the co-borrower. All Education Loans will be in the name of Students only and the parents are added as co-borrowers. While fixing the repayment, I told my employer that he has taken up a job, but for 3 months only. Even if he earns money, I will pay the EMI. How can any bank or lender expect the kids to pay to loan at the start of their career when their salary is abysmally low. The Bank says that my son can claim deduction under section 80E. What a Joke. My son's annual salary will not be more than even the threshold/exemption limit, so no point of tax. What is the point of availing deduction when his taxable salary does not cross the threshold limit. Can I directly apply deduction while filing IT returns or how do I make my employer convince.

        Delete
      3. If you are borrower they why you say that loan is in the name of SON. Co borrower means that loan is on joint name . You should ask bank to update name in loan account and claim deduction.

        As per section benefit can be claimed by the person who has taken the loan from the bank.

        In your case loan has been taken by both of you (co borrower) so both of you are eligible to claim the deduction.

        Delete
    8. The Education Loan will always be in the name of the Student pursuing the higher studies. The parent will be designated as Co-borrower. The annual Interest Certificate will be issued in the name of Student and simultaneously mentioning father name as co-borrower. All Banks follow the same designation i.e., student is the borrower and father is the co-borrower. My query is whether father as co-borrower can claim deduction.

      ReplyDelete
      Replies
      1. As per income tax act parents can claim deduction ,

        and as per bank instruction ,loan can be given on student name .

        so if we agree with your employer ,then parents can never claim the deduction,

        But this is not correct ,in our view being a co borrower ,parents can claim deduction

        Delete
    9. sir,
      My son (Borrower) and myself (Coborrower & Father) availed a education loan of Rs.20.00 lacs from a nationlised bank for my sons MS course in USA. I have availed a sum of Rs. 8.50 lacs now and the balance will be availed as per the requirement of the university (every semester).At present interest is being charged in the account, which is around Rs.9500.00 per month. I am servicing the same very regularly.
      The question is whether i am entitilled to avil the advantage of SECTION 80 E of IT Act.That is supposing the annual interest applied in the loan account is Rs.66500.00 and amount paid is Rs.66500.00 then i am eligible to deduct Rs.66500.00 from my annual income...
      thank you and regards....

      ReplyDelete
    10. sir,
      My son(Borrower)and myself(Coborrower & Father)have availed an education loan from a nationalised bank for my sons MS in USA.The quantum of loan sanctioned by the bank is Rs.20.00 lacs to be repaid in 180 months after completion of studies.We have availed so far Rs.8.50 lacs and the monthly interest is Rs.9500.00 per month presently, which will increase depending on the avilement of loan.I am paying /servicing the interest regularly.Sofar Rs.66500.00 has been debited in the account and the same has been serviced by me.

      My question is
      1) whether i am entitled to avail the benefit of Section 80 E.since the course what he is doing is after BE and not after Higher secondary education.
      2)if i am eligible How much amount can be deducted from my elegible income? Is it Rs.66500.00 can be deducted from my income?
      thank you and regards

      ReplyDelete
    11. i have taken education loan in 2008-09 of 50000, firt i have taken 21530 in 2008 and then draw remaining 28530 in 2009 and paid interest of 21530. then in 2010 ihave started paying but tlill ihave not claimed any tax benefit. now can i claim whole intrest paid from 2008 in this year?

      ReplyDelete
      Replies
      1. you can claim interest in the year of payment it self not in the later year. So in currant Financial year you can only claim interest paid during the fy 2012-13

        Delete
    12. Sir,
      My son(Borrower) and me(co borrower) has taken education loan of 3,00,000 in 2008 from Bank of India and the total amount we took only 2,62,550 as required for the B.Tech. I paid interest of initial 2 year but as I have no fix income source due to some family problems I could not pay the interest, initially I paid interest on the rate of 10.75% but now bank manager is saying that interest rate is floating and i.e. 13.5% presently and course of my son has been completed in June 2012 but presently he has no job so that I am not able to pay the interest and manger is pressuring to pay the interest we are saying to give us time but they are pressuring to pay the interest and the amount so please tell me about the interest rate of Bank of India

      ReplyDelete
      Replies
      1. You should write letter to Bank Manager and request him to quote the rules under which such rates are applicable. Further you can meet senior bank officials .

        Delete
      2. Hello sir,

        can i change the name of the interest certificate in my name as a father and pay the EMI for my sons' education loan with bank.

        will bank change the certificate in my name sir?

        Delete
    13. sir,

      I have taken education loan for my B.tech(2002-2006),till now i did't pay any interest.Now in 2012-2013 i want to do one time settlement with bank.The amount i have taken is 1,60,000/-.I was doing settlement for 2.2L.
      Can i claim deduction for this amt,If so how much amount?

      ReplyDelete
      Replies
      1. yes , you can claim amount in excess of principal as interest in present year(payment year)
        in given case you can claim 2.2-1.6=60000 as deduction under section 80E

        Delete
    14. I took an education loan of 987000.00 from one of the public sector banks for study period of 2010-12 and my moratorium ended in October 2012. I paid nothing during study period but in month of October 2012(before end of moratorium) I paid a sum of 267700. Accrued interests for year 2010-11, 2011-12 and 2012-13 (till date) are 39000, 104000 and 86000 respectively. I am asking my bank for interest certificate but they are giving a certificate which states that only 86000(current year's interest) out of the entire repayment is interest payment and remaining is principal repayment. So in such a case how can I get benefit on accrued interest of year 2010-11 and 2011-12.

      ReplyDelete
    15. Is the deduction applicable for the eductaion loan taken to pursue Part time Higher studies, from a premier institue in India. Will i be able to deduct the Interest paid towards this education loan from my Total Income?

      ReplyDelete
    16. Hi,
      I had availed an education loan for higher studies in 2010. My father paid the interest during the year 2010-2011 and availed tax benefit for the same. I completed my education in 2011 and started working from 2012 and over the last year have been repaying the loan with interest. The loan statements shows
      Account Name: MY NAME
      Joint Holders: FATHER's NAME
      Suppose I have paid an interest amount of Rs. 150,000, can I avail the tax benefit under 80E for some part of the amount (say, 100,000) and my father on the remaining? Is this allowed?
      If allowed, do I need to get a separate Annual Interest certificate from bank for myself and my father so that we both can avail the benefit? Please advise.

      Thanks!

      ReplyDelete
      Replies
      1. It is better if Bank can issue both of you separate certificate . There is no doubt to us that both of you can claim interest deduction according to payment made by both of you against interest.

        Delete
    17. Hi
      I have take a loan form State Bank of Travancore (Rs.35,000) during 2006-2007 financial year. I haven't paid any interest till 2012.Now i am willing close the loan in this month ie Jan 2013.
      The total closing loan amount is near Rs.70,000/-.

      Can i claim deduction for this amt,If so how much amount?

      ReplyDelete
      Replies
      1. You can claim Interest amount paid during the year.So interest amount included in 70000 is eligible for deduction.You should get certificate from bank about interest amount.

        Delete
    18. Can income tax exemption be given to an employee who has taken two education loans for one son at a same time?

      ReplyDelete
      Replies
      1. yes he can claim interest on both the loans

        Delete
    19. I took my loan on 2007 for 3.5 lacs of which in this FY , I repaid 1.51 lacs .Also the moratorium intt amounted to 1.65 lacs and the intt pertaining to this FY is 53000. How much am I entitled for exemption from tax?
      P.S.-this is the first year for my loan repayment

      ReplyDelete
      Replies
      1. Interest amount paid irrespective to year which it relates to is eligible for deduction u/s 80E

        In you case interest amount is paid 1.65+0.53=2.13 Lakh If actually paid

        Delete
    20. I took a loan from Citibank, US, for my MBA which I completed in Dec 2006. I shifted back to India last year and continue to pay back the loan in dollars from my savings there. I am working here now. How can I benefit from this provision? Can I get annual loan statement from Citibank and submit with my Income tax filing to claim benefit for the interest paid?

      ReplyDelete
      Replies
      1. loan should be taken for studies in approved institutions and loan must be taken from specified financial institution .In your case both these points are not fulfilled so you can not claim deduction u/s 80E

        Delete
    21. Hi,

      I have taken an educational loan in a private bank in the year 2008 for amount of 1,50,000. My father paid the few interest (Not full interest for the year) amount while i am studying till 2010 and later he couldn't pay due to few problems. In the year 2011, i have paid few interest amounts. Then in june 2012 i paid the amount of rupees 80,000 (Overall payment i have made towards loan is 1,10,000). Currently, i am married and quit my job and am willing to do a one time settlement. The overall payment now shows as 1,00,000. Is it possible to make an one time settlement with lower amount? If so, till how much i can get the deduction for the final payment?

      ReplyDelete
    22. Sir,
      My mother had taken loan for Master degree and she had been paying the interest amount since 2010. I am a married man aging 29 with one kid but currently unemployed. The loan is in my name with my mother as co-borrower. Whether my mother can avail tax exemption under 80E ?
      Regards,

      ReplyDelete
    23. In that case the actual amount accumulated for the current year i.e. 13000/- not the actual paid Rs.40000/- only exempted by computer generated certificate not for the actual amount paid by the individual. In Andhra Bank I faced same Problem. Is there any universal guidelines to the banks issued by the Income Tax Department of India

      ReplyDelete
    24. I took an education loan from a US bank while I was living there. I am currently employed in India, but I am still paying for the loan. Is there any provision under which I can claim this education loan for tax deduction in India?

      ReplyDelete
      Replies
      1. No you can not , you can claim benefit only if loan is taken or your name or joint name with your son

        Delete
    25. Hi,

      One of my employees has taken education loan from bank of India for doing his MBA from an institute run by a private limited company registered under section 25. Can he get deduction for interest and principle payment u/s 80E? Do I need to consider it for deducting TDS?

      ReplyDelete
      Replies
      1. If MBA is approved then he can claim 80E deduction

        Delete
    26. Hi,
      I did my graduation from Govt approved college and i took loan of Rs 400000 for 4 years at 13% interest from the year 2009 to 2013 from Punjab national Bank. Bank employees told to start pay the amount after 6 months after my education but now i got job which i join on august 1 this year 2013 and i will get rs 20,833/month which is 2.5L/year so can u help me in finding out how to start the process and n claim for the interest amount on my loan from my income and how to approach to the employers where i will start working form next month and what all formalities are there to do..please help sir as i don't know anything about tax rules and formalities.

      ReplyDelete
      Replies
      1. This year your Income is for 8 months and total will be less than tax exemption limit so no need to claim any deduction including education loan deduction u/s 80E.

        Further in next year you can claim interest amount paid subject to maximum 40000/-

        Delete
      2. Sir with due respect,can u please explain me in short that what is this tax exemption limit means with example taken on my loan amount ?? and one more doubt sir,
        whether the amount deducted by the company as tax for these 8 months of this year will go in waste or what ?? i cant save that money by anyway sir for 8 months sir ??

        Delete
      3. Tax exemption limit means limit up to which income is exempt from tax . In FY 13-14 limit is 2 lakh for which no tax is payable.

        This year your income for 8 months is around 167000 ,which is below taxable limit and your company should not deduct any tax on it so ques of wasting of tax does not arise.

        so you should intimate your company that your income is below taxable limit in fy 13-14 so no tax should be deducted

        Delete
      4. Thank you sir, Sir can you please tell me under which section and rule i can intimate my company by requesting them that they cant deduct the tax from my income because they have specified in my call letter that after i join there company as a trainee engineer,they will deduct the taxes as per income tax rules.

        Delete
      5. Clause given by company is general clause .As per income tax rules no tax is deductible so thy will not deduct any tax at all.

        Just give them full year income details and request him not to deduct tax . Section not required.

        Delete
      6. Thank you so much sir for clearing my all doubts.

        Delete
    27. sir one more doubt: It means that i will get full income amount/month without any deduction from the company ??

      ReplyDelete
      Replies
      1. Yes , no tds deduction this year .

        Delete
      2. sir now i have joined my company, so they said they ll deduct TDS from our monthly salary and they will give the deducted TDS amount in next year in month of july..so now what to do sir..?? is that fine by trusting them or we have any legal rights or tax law that cannot allow them to deduct TDS also from our income this year..??

        Delete
      3. In your case nothing is due as tax ,so your employer has no right to deduct the tax from salary. So you can ask the account department that tax should not be deducted from your salary

        Delete
      4. But sir as u said i should go and ask the accounts department.But accounts department is controlled by company HR right ?? so whether i should go n speak with the HR that why the company is deducting TDS from our salary ?? and also whether i can approach to them like this in first month of my job as now i m trainee engineer there so is it right to ask. because afterwards they may check on me. please help sir

        Delete
      5. Don't ask/quiz them ,just chat with them and say as I am new to Job, I just want to check ,how tax is deducted or calculated for knowledge and then you can carry on .At least you can wait for first month.

        if every thing is ok after first month then no need to quiz ,otherwise you can ask then the reason for tax deduction,

        Moreover ,if new trainees are there ,you all can go in a batch

        Delete
    28. Sir,
      I am now paying my wife's educational loan taken before our marriage.Since she is completely dependent on me now I am paying it.The loan is in her name as borrower and her father as co borrower.Now can I change the co borrower name(Loan from SBI).And since she is married and me as her husband it is now my responsibility to pay the loan.so can i claim for deduction under 80E,provided a dependent certificate of my wife to me ? Please give me a solution so that I can take the benefit under this act and to minimize my financial burden.Thanks in advance.

      ReplyDelete
      Replies
      1. As loan has not been taken by you ,so you can not claim deduction

        Delete
    29. my son is studying in 7th class he comes under 80c or 80e

      ReplyDelete
    30. I have taken education loan for my son Age 27 yrs for higher studies abroad. I am co borrower. I am paying interest per month to avail rebate as per the bank scheme. Can I claim tax exemption u/s 80 E.

      ReplyDelete
      Replies
      1. As specified in the section above that 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"

        if above condition is satisfied then only you can claim deduction u/s 80E.

        Delete
    31. Hi Sir,
      I am Neelam. My son has taken an Education loan of Rs. 29.98 lacs from SBI as he is doing B.Tech from Australia.My husband is his co-borrower & I am paying the interest amount of this loan. Can I claim the tax rebate u/s 80E?

      ReplyDelete
      Replies
      1. No you can not claim deduction .Further your husband can claim deduction only if 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"

        if above condition is satisfied then only your husband can claim deduction u/s 80E. .Further payment should also be paid by him

        Delete