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Section 80 E

devijegatha (jmc6) (36 Points)

16 April 2010

Section 80 E - exemption

Sir,

Whether the section 80 E deduction for education loan of childrens,is available from the parents income . if so, what are the condtions for the same.

pl. give the clarificaiton.

thanks

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8 Replies

Ratan Deep Saxena (Asstt Manager (Accounts & Finance)) (2998 Points)
Replied 16 April 2010

The deduction under section 80E is available to an individual if following conditions are satisfied:

1. Deduction available only to Individual not to HUF or other type of Assessee.

2. Deduction amount: – The amount of interest paid is eligible for deduction and moreover there is no cap on the amount to be deducted. You can deduct the entire interest amount from your taxable income. However there is no benefit available on the repayment of principal amount of the loan.

3. Deduction available if Interest is been paid during the previous year and was paid out of income chargeable to tax which means if repayment is made from income not chargeable to tax thandeduction will not available.

Note: – Earlier to previous year 2006-07 the above deduction was available only for Interest on loan taken and repaid by the assessee for his own studies.

4. Interest should have been paid on loan taken by him from any financial institution or any approved charitable institution for the purpose of pursuing his higher education. Interest on Loan taken from relatives or friends will not be eligible for deduction under section 80E.

a. 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;

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 otherfinancial institution which the Central Government may, by notification in the Official Gazette, specify in this behalf;

5. Loan should have been taken for the purpose of pursuing higher studies of Individual , Spouse, Children of Individual or of the student of whom individual is legal Guardian.

Higher studies means full-time studies for any graduate or post-graduate course in engineering, medicine, management or for post-graduate course in applied sciences or pure sciences including mathematics and statistics;

Income tax department has added (W.e.f. A.Y. 2010-11) additional fields of studies (including vocational studies) pursued after passing the Senior Secondary Examination or its equivalent from any school, Board or University recognised by the Central or State Government will also be covered underdeduction in respect of interest paid on loan taken for higher education.

6. Interest should have been paid for the loan taken for the purpose of pursuing his higher education or of the spouse and children. From A.Y. 2010-11 Relative also includes student for whom the individual is the legal guardian.

7. Deduction period: - Deduction 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 is paid by the assessee in full, whichever is earlier.

The tax benefits on education loan are only valid once you start the repayment and moreover they are only available up to eight years. For instance if your loan tenure exceeds eight years, you cannot claim for deductions beyond eight years.

Hence it is better that the education loan is repaid within eight years. Unless if the loan amount is very high and it is difficult to afford a high amount of equated monthly installment (EMI), one should not opt for education loan with longer tenure.

*Initial assessment year means the assessment year relevant to the previous year, in which the assessee starts paying the interest onthe loan.

8. Loan should be in the name of Individual: - Deductions on education loan can only be claimed if the loan has been taken in your own name. If your parents, spouse or sibling has taken the loan for your studies, then you are not entitled to get tax benefit.

9. The loan includes not only tuition or college fees but also other incidental expenses for pursuing such studies like hostel charges, transport charges etc.

10. Repayments of education loan NOT covered under Section 80C.

11. There is no condition that the course should be in India.

regards,

ratan

CourseCart.in (Mentor at SHAYVIDZ Academy) (3756 Points)
Replied 16 April 2010

Originally posted by : devijegatha
	Section 80 E - exemption Sir, Whether the section 80 E deduction for education loan of childrens,is available from the parents income . if so, what are the condtions for the same. pl. give the clarificaiton. thanks

Dear devijegatha ,

1. Section 80E provides DEDUCTION (not exemption) equal to ANY AMOUNT OF INTEREST on Educational Loan taken from the Financial Institutuion or approved Charitable Institution for the purpose of pursuing HIGHER EDUCATION for HIMSELF or FOR HIS RELATIVE i.e. SPOUSE and CHILDREN of the Individual.

2. Conditions

A. Maximum Amount of Deduction - Any amount of Interest paid is eligible. but principal repayment is not eligible.

B. Period - Dedctn is available for a maximum period of 8 A.Y. including 1st yr of repayment or until intt is fully paid, whichever is earlier.

C. Payment should be made out of income chargeable to tax.

D. Please do check the meaning of HIGHER EDUCATION.

2 Like

CA LOVELY ARORA (C.A. B.Com (H) Graduate) (2151 Points)
Replied 16 April 2010

Words of Act :-

Section 80E

DEDUCTION IN RESPECT OF REPAYMENT OF LOAN TAKEN FOR HIGHER EDUCATION.

(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 repayment of loan, taken by him from any financial institution or any approved charitable institution for the purpose of pursuing his higher education, or interest on such loan :

Provided that the amount which may be so deducted shall not exceed twenty-five thousand rupees.

(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 loan referred to in sub-section (1) together with interest thereon 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 notified by the Central Government 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 Gazette, specify in this behalf;

(c) "Higher education" means full-time studies for any graduate or post-graduate course in engineering, medicine, management or for post-graduate course in applied sciences or pure sciences including mathematics and statistics 1002f ;

(d) "Initial assessment year" means the assessment year relevant to the previous year, in which the assessee starts repaying the loan or interest thereon.

Education can be either of self or spouse or children, an individual can claim deduction for the amount of loan repayed by him on education of them...........

1 Like

manikandan.J (Accounts Manager) (363 Points)
Replied 16 April 2010

it is available only for individual for self studies your higher eduction etc... only eligible to claim Individuals for example lecture working the some educational institution he want study further Ph.d so he can pay the fees and claim it

Pratik K (Student) (3406 Points)
Replied 16 April 2010

Thanks all for detailed clarifiaction

Pratik K (Student) (3406 Points)
Replied 16 April 2010

Recently I heard that The word "Higher Eduation" from section 80 E will be removed soon and all cources like BCO,MBA,BBA,BCA etc even inludd for the Sec80E.

Can any one explain this too?

CA LOVELY ARORA (C.A. B.Com (H) Graduate) (2151 Points)
Replied 16 April 2010

dear pratik,

it is true that sec. 80E has been amended to include any course in its scope............ and also the relevant provisions has been taken into effect w.e.f. 01.04.2010 in this regards..........

So, an assessee can claim deduction u/s 80E for the repayment of loan taken for such courses like B.COM, B.A., M.B.A., B.C.A., C.A., C.S., C.W.A. etc..........