Our one of the client has taken foreign bank loan for completing her eductaion. Now her education is completed. She want to refinance her foregin bank loan by taking loan from Indian Bank.
Whether she is eligible for 80E deduction for interest payment to Indian Bank?
If the loan taken from the Indian Bank is of Education Loan and not for repayment of that foreign bank loan, then the assessee can claim deduction u/s 80 E
Sec 80 E of IT Act
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]
The deduction specified above 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
According to me I don’t think that the client will be eligible to take the deduction u/s 80E.
The section states that the deduction is available if the loan is taken for higher education. IN your client’s case he has first taken an education loan from a foreign bank & now he has taken a loan from a Indian bank to repay the loan taken from the foreign bank. So the purpose of taking the loan from the Indian bank is not for taking higher education but repayment of the loan taken. Hence the deduction u/s 80E wud not be available to your client.
Purpose of Loan is Education ..
Take over of loan donot change the purpose. Facility of take over loan is being adopted by the Banks in India. Ultimate purpose is Loan for Higher Education.
In my opinion , eligible for deduction u/s 80 E.
KRS Khati
Purpose of Loan is Education and Take over of loan donot change the purpose. Thus eligible for deduction u/s 80 E.
Take over loan amount should be equal to the loan outstanding in foreign loan account.
CAclubindia
