The Benefits of Education Loan

Education loans carry a lower interest rate than personal loans.

A moratorium period is associated with education loans, during which neither the student nor the bank is obligated to receive EMI payments.

The Government of India's education loan interest subsidy schemes exempt economically disadvantaged individuals from paying interest on education loans during the moratorium period. The recipient is also eligible for the education loan income tax exemption under Section 80E of the Income Tax Act 1961.

What tax benefits do education loans offer?

Students are compelled to obtain education loans due to the escalating expenses of obtaining an education. The government thankfully provides some relief regarding education loans through tax benefits. Here is everything you need to know about Section 80E of the Income Tax Act's education loan tax benefits:

1. The 1961 Income Tax Act, Section 80E

Under Section 80E of the Income Tax Act of 1961, students who intend to obtain an education loan, another name for a loan taken out for higher education, are eligible for tax deductions. This particular segment of the IT Act addresses education loans. Higher education loan tax exemptions are available to students enrolled in Indian or international universities.

Higher education abroad typically entails more significant financial burdens for students than those who pursue advanced degrees domestically in India. In addition to the substantial tuition fees, students must also allocate funds for boarding or dormitory expenses, travel expenditures, and the acquisition of study materials and instruments (e.g., laptops and engineering boards). Section 80E of the IT Act was enacted with the government's consideration of these numerous expenditures. Students are eligible for some respite concerning the repayment of the interest portion of their education loan under this section.

2. What constitutes the scope of Section 80E?

Students are eligible to receive an income tax benefit on their education loans when they become taxpayers under Section 80E of the IT Act.

Section 80E extends the tax benefit to the interest portion of the student's education loan.

The 80E deduction does not apply to the amount of the principal loan.

Students may deduct the total amount paid as interest while repaying the education loan from their annual taxable income; the interest paid is not subject to taxation.

Deductions are available for the complete interest portion of the loan.

3. Conditions and Terms Relating to Section 80E

To qualify for an education loan deduction on your income tax return under Section 80E, you must satisfy the following requirements:

Tax deductions are available for education loans obtained on behalf of one's spouse or biological or adopted offspring.

You may also qualify for the deduction under section 80E if you are the student's legal guardian.

To qualify for 80E deductions, the loan must have been obtained from a recognized financial institution, such as a bank, NBFC, or charitable organization.

If an employer or a relative authorized the loan, you are ineligible for 80E deductions.

The 80E deductions exclusively pertain to individuals who are borrowers, excluding Hindu Undivided Families (HUFs). Firms and corporations are also ineligible for 80E deductions.

In closing,

At present, most students must take out student loans to gain admission to a reputable institution. Considering this, Section 80C of the IT Act provides the government with student loan tax deductions of ₹150,000 on the principal loan amount.


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