Section 80E of the Income Tax Act, 1961 allows taxpayers to claim a deduction on the interest paid on education loans taken for themselves or their relatives.

What is Section 80E Education Loan Deduction?

Section 80E offers a deduction for the interest paid on loans taken for higher education. Whether the loan is for the individual or their relative, the assessee can claim this benefit. There is no fixed maximum limit for this deduction—the full amount of interest paid on a qualified education loan is eligible. The deduction is available for up to eight years, starting from the year the interest repayment begins. This benefit is applicable only under the Old Tax Regime.

Eligibility for 80E Deduction on Education Loan

• Only individual taxpayers can claim the 80E deduction; HUFs, companies, and other entities are not eligible.
• The loan must be taken for the higher education of the individual, their spouse, children, or a student for whom they are a legal guardian.
• The deduction applies only when the loan is obtained from a recognised financial institution or a charitable organisation—not from friends or relatives.
• The loan must be specifically for higher education (studies after Class 12).
• The deduction can be claimed for a maximum of eight years.
• It is available only to taxpayers who opt for the old tax regime.

Where Should You Take an Education Loan From?

Section 80E benefits apply only when the interest is paid on an education loan taken from a bank, financial institution, or an approved charitable organisation. Loans borrowed from friends or relatives for higher education are not eligible for this deduction.

Purpose of Education Loan

You can claim the education loan deduction only if the loan is taken for higher studies. It does not matter whether these studies are pursued in India or abroad.

Higher studies include any course undertaken after completing senior secondary education or its equivalent, covering both regular and vocational programmes.

Maximum Tax Benefit Under Section 80E

You can claim the full amount of interest paid during a financial year, as there is no upper limit on the deduction (unlike Section 80C, which is capped at ₹1.5 lakh).

Example:
Gross income after other deductions = ₹6.7 lakh
Interest paid on education loan = ₹2 lakh (approx.)
Taxable income = ₹4.7 lakh

Documents Required Under Section 80E

The deduction available is the total interest component of the EMIs paid in the financial year, with no restriction on the maximum amount.
You must obtain an interest certificate from the lending bank, which clearly separates the principal and interest portions of the payments made during the year.

Period of Deduction

The deduction for education loan interest under Section 80E starts from the year you begin repaying the loan.
It can be claimed for a maximum of eight years or until the entire interest is paid off, whichever occurs earlier.
For example, if you repay the loan within five years, the deduction is allowed only for those five years. If the repayment period goes beyond eight years, no deduction is available after the eighth year. Therefore, repaying the loan within this time frame helps you make the most of the tax benefit.

Early Repayment of Education Loan

Section 80E allows taxpayers to claim a deduction on the interest portion of an education loan for up to eight years from the year repayment begins, or until the loan is completely repaid, whichever is earlier.

Some borrowers prefer extending their repayment tenure to maximise tax benefits. Instead of paying off the loan early, they invest surplus money elsewhere with the expectation of earning higher returns than the loan’s interest cost. This strategy is suitable for individuals confident in their investment abilities and who aim to optimise both tax savings and potential wealth creation.

Conversely, if your focus is on becoming debt-free and maintaining a strong credit history, early repayment is the better option. Clearing the loan sooner lowers your interest outgo and strengthens your financial profile, which can be advantageous when applying for larger loans in the future, such as a home loan.

Conclusion

The government has taken steps to improve access to education by offering education loans and providing tax benefits on their repayment. These initiatives aim to make higher studies more achievable for a broader section of society. Education loans help not only students but also working professionals who wish to pursue advanced education after gaining experience.

Frequently Asked Questions on Section 80E – Education Loan Deduction

1. How much deduction can I claim under Section 80E?
There is no upper limit on the deduction amount. You can claim the entire interest paid on the eligible education loan during the financial year.

2. Is Section 80E included under Section 80C?
No. Section 80C allows deductions for tuition fees and various investments, while Section 80E specifically provides a deduction for the interest paid on a higher education loan.

3. For which types of loans can I claim deductions under the Income Tax Act?
Taxpayers can claim deductions for education loans, home loans, and certain personal loans, depending on their purpose and the applicable sections of the Act.

4. Can I claim both principal and interest of my education loan under Section 80E?
No. Section 80E allows deduction only for the interest component of the EMI. The principal repayment does not qualify for any deduction under this section.

5. Can I claim Section 80E if my child is studying abroad?
Yes. You can claim the deduction even if your child pursues higher education outside India. The benefit covers both regular academic programs and vocational courses.

6. Who is eligible to claim the deduction under Section 80E?
Only individual taxpayers can claim this deduction. HUFs, firms, and companies are not eligible.

7. Can I claim the deduction if the loan is taken from a friend or relative?
No. The loan must be obtained from a recognised bank, financial institution, or approved charitable organisation.

8. For how many years can I claim the Section 80E deduction?
The deduction is allowed for a maximum of 8 years, starting from the repayment year, or until the interest is fully paid—whichever happens earlier.

9. Can a legal guardian claim the deduction?
Yes. If you are the legal guardian of the student for whom the education loan is taken, you can claim the deduction.

10. Does Section 80E apply to part-time or distance education courses?
Yes, as long as the course qualifies as higher education undertaken after passing senior secondary (Class 12) or its equivalent.

11. Can I claim this deduction under the new tax regime?
No. Section 80E benefits are available only to taxpayers who opt for the old tax regime.

12. Is an interest certificate required to claim Section 80E?
Yes. You must obtain an interest certificate from the lender specifying the interest and principal components of the EMI.