80E.

(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 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.

from above main points to avail the deduction are

1. Eduction loan should be taken by Assessee.
2. The amount eligible for deduction is repayment of eduction loan interest.
3. There is no limit for amount of repayment of interest.Unlimited amount of
interest can be deducted under this section.
4. This deduction is available 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.
5. Initial Assessment year means previous year in which assessee starts
paying the interest amount.
6. The loan should be taken for the purpose of higher eduction,and higher
eduction means " any course of study pursued after passing the Senior
Secondary Examination or its equivalent from any school, board or
university recognised by the Central Government or State Government or
local authority or by any other authority authorised by the Central
Government or State Government or local authority to do so;
7. The loan should be taken from any financial institution or any approved
charitable institution.(in simple main Banks are covered)
8. The loan should be taken for higher study of himself or studies of relative
9. Relative under this section means the in relation to an individual, means
the spouse and children of that individual the student for whom the
individual is the legal guardian.
10. Earlier to previous year 2006-07 the above deduction is available for loan
taken and repaid by the assessee himself for his studies only but after
finance act 2007 ,"the deduction is available for the purpose of higher
education of his relative also.relative, in relation to an individual, means
the spouse and children of that individual or the student for whom the
individual is the legal guardian.
11.There is no deduction available for repayment of principal ,this deduction
is available to only for interest repayment.
12.This deduction is available for individual only and not for other type of
assessee .
13.The loan should be for pursuing higher studies means loans taken not
only for tuition or college fees but also loan taken other incidental
 expenses for pursuing such studies like hostel charges,transport charges
etc etc is also covered under this deduction,
14.There is no condition that the course should be in India .
15. 80 E (deduction on Interest on study loan) was available to parents and person himself but
now after finance act 2009(2) it is available to Legal guardian also.
Updated section is given below for ready reference

[Deduction in respect of interest on loan taken for higher education.

80E. (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 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.

(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 the interest referred to
in sub-section (1) 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 88[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 other financial institution which the
Central Government may, by notification in the Official Gazette89, specify in this
behalf;
(c) “higher education” means any course of study pursued after passing the Senior
Secondary Examination or its equivalent from any school, board or university
recognised by the Central Government or State Government or local authority or by
any other authority authorised by the Central Government or State Government or
local authority to do so

(d) “initial assessment year” means the assessment year relevant to the pre-vious
year, in which the assessee starts paying the interest on the loan;]

(e) “relative”, in relation to an individual, means the spouse and children of that
individual or the student for whom the individual is the legal guardian.]
please read some hypothetical examples for clarification.

Qus: Ram has taken a Eduction loan for his higher studies on
20.06.2005 and started paying installments including interest
from 20.06.2007.

Ans:In above example Ram will get tax benefit under section 8o E from
p.y 2007-08 i.e initial year of payment and next seven year i.e upto
previous year 2014-15 or upto full payment of loan which ever is earlier.

Ques:Ram has taken a loan for his higher studies on 20.06.2005

and paid 20000 interest in previous year and his father has paid
15000 interest payment in previous year 2007-08.who can claim
benefit of deduction.

Ans:Only ram will be eligible for deduction of 20000 rs .His father is not
eligible for deduction the reason behind this is that loan has been taken
by the Ram and not by his father as mentioned in point one above
,though his father is satisfy the condition of relative and paid the interest
also but he has not taken the loan

Ques:Can son /daughter can claim the benefit of deduction for

loan taken for higher studies of his /her father/mother.
Ans: No,on the reverse ,parents can claim the benefit for payment of
interest for higher studies of their children.

Ques:Ram has taken a loan for his higher studies ,and has repaid the laon
interest amount but unfortunately he has not succeeded in exams and
could not complete his higher studies.

Ans:As per section loan should be for "pursuing his higher

education or for the purpose of higher education of his
relative"and ram has pursued the higher course so he should be eligible
for the deduction as he has fulfilled all the conditions and there is no
condition that the course assessee has persuaded should b completed or
assessee should be passed definitely in the course the main dedmand of
the section is purpose of the loan should be higher eduction and it should
be drawn and used for the purpose of higher studies for his or his
relatives.

.
Qus:An educational loan taken four years back. The next year a sum of Rs.4000/=
was paid to the bank by way of interest. Following years nothing was paid.

Now in the current year borrower is employed and paid a sum of Rs.40000/= paid to
the bank towards interest. The interest calculated for the current year is Rs.13,000/=
only. The rest is interest accrued for the previous years. On what amount can he/she
claim the exemption:-

a. on the whole amount of Rs.40000/- or

b. on the interest payable for the current year only i.e. Rs.13,000/=

Ans:80 E deduction is available on payment basis ,in present case 40000 is allowed
as per section 80E

Read more: Higher Education Loan Deduction 80E on son's/dependent eduction. |

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