10 February 2021
I took an education loan in May 2018 for my higher studies. I started repayment of the loan in May 2020. During those two years (FY19 & FY20), the accrued interest on the loan is INR 1.50 Lakh. I have paid all the accrued interest and interest generated in FY21 (Approx 80k ) with EMI and prepayment.
My question to the forum is whether the accrued interest of FY19 and FY20 can be calculated for a tax deduction under section 80E of the Income Tax Act?
Interest generated for FY21 is eligible for tax deduction but I am not sure for interest generated in FY19, FY20, and paid in FY21.
10 February 2021
The deduction allowed is the total interest part of the EMI paid during the financial year. There is no limit on the maximum amount that is allowed as deduction. You, however, need to obtain a certificate from your Bank. Such certificate should segregate the principal and the interest portion of the education loan paid by you during the financial year. The total interest paid will be allowed as a deduction. No Tax benefit is allowed for the principal repayment. So it will be available in the year of payment...not on accrual basis
CAclubindia
