Source of an education loan u/s 80e

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SUPRAKASH MITTRA

CA PSU

34 Points Posted on 23 September 2016

DEAR SIR, SOME HOME FINANCIERS OFFER TOP UP LOANS TO THEIR EXISTING CUSTOMERS FOR PURPOSES e.g. MARRIAGE/ HOUSE REPAIRING/ FURNISHING/ OR ANY OTHER PERSONAL PURPOSES i.e. A PERSONAL LOAN. THE SECURITY REMAINS THE SAME HOUSE PROPERTY OFFERED INITIALLY AS MORTGAGE AGAINST THE ORIGINAL HOME LOAN. HENCE AS I UNDERSTAND, THESE TOP UP LOANS ARE ACTUALLY IN THE NATURE OF MORTGAGE LOAN AGAINST PROPERTY.

NOW MY FRIEND HAS REQUIREMENT OF LOAN FOR FINANCING THE EDUCATION OF HIS CHILD IN A FOREIGN UNIVERSITY, FOR WHICH HE HAS BEEN UNSUCCESSFUL TO SECURE A TYPICAL "EDUCATION LOAN" FROM ANY BANK / F.I. BUT HE HAS BEEN OFFERED A TOP UP LOAN BY HIS PRESENT HOME FINANCING BANK. NOW MY QUESTION: CAN HE USE THIS TOP UP LOAN AS AN EDUCATION LOAN AS SUCH ? AND CLAIM BENEFITS U/S 80E IN RESPECT OF THE INTEREST PAID ON THIS TOP UP LOAN? N.B. THE CHILD HAS DONE HIS CBSE +2 FROM INDIA. THANKS & REGARDS

Replies (2)

CA Neha Agrawal

505 Points Posted on 23 September 2016

Top up loan on home loan will be considered as home loan irrespective of the purpose for which it is taken.

Alternative option could be availed if the financier provides for- customer can be granted separate Education Loan by mortgaging the same property as home loan. In this scenario the financier can consent letter from the customer for mortgaging the property for Education Loan.

SUPRAKASH MITTRA

CA PSU

34 Points Posted on 25 September 2016

Thanks for your reply. If it is so, then can I assume that a Top up loan used for my daughter's marriage is a HOME LOAN? If so then I should get benefit u/s 24 on this amount also. Doesn't seem logical.

The conditions of Sec.80E e.g. loan amount for higher education (including in a foreign country) after senior secondary examination (in India) / Loan from a financial institution/ Amount to be solely used for paying education exps like tuition fees, hostel chgs, books etc/ Loan interest repaid from parent's own taxable income, are all satisfied. The Act doesn't specify anywhere that loan against house mortgage, personal loan taken from an FI/ Bank, doesn't qualify. However the facts may be subject to scrutiny. Will you please state your views on these points and further elaborate your kind interpretation on the terms & conditions for benefit u/s 80E? Regards