The education industry in India is reportedly estimated to reach US$144 billion by 2020. The sector has constantly managed to push the importance of pursuing basic and higher education for economic development. Demographically India has an advantage of having one of the largest youth populations, coupled with widespread educational institutes and schools, and hence educational expenses naturally becomes one of the liabilities one has to account for.
With the growth of the Indian economy and rise in income levels, the spending on education has increased too, that accounts for the second-highest share of wallet for middle-class households in the country.
The spending for pursuing education can let you save on income taxes. You can claim deduction of Interest paid on loan taken for pursuing higher education from taxable income under section 80E of the IT Act.
According to Section 80E the deduction is allowed on the total interest amount of the EMI paid during the financial year. The loan has to be taken from a bank or financial institution for the purpose of pursuing higher studies. One needs to obtain a certificate from the bank wherein the principal and interest amounts of the education loan paid during the financial year should be mentioned separately. It is because no deduction is allowed on the principal repayment amount.
Amount of deduction under Section 80E:
Interest amount paid during the financial year is allowable as deduction from taxable income. There is no limit on the deduction amount. The benefit of deduction is available for a maximum of 8 years or till the interest is paid- whichever is earlier. It is applicable even when you have taken the education loan for your spouse, children or for a student for whom you are legal guardian.
This is why it is important to wind up higher education loan within 8 years to get the maximum benefit of section 80 E.This is why it is important to wind up higher education loan within 8 years to get the maximum benefit of section 80 E.
It is advisable to wind up the higher education loan within next 8 years to get the maximum benefit of section 80E. Parents can make use of this section to give their children the best of opportunities in higher education and secure their career too. If they wish to send their children for foreign studies and take loan for financing it, can also claim the deduction under section 80E. The deduction is applicable to all courses pursued after senior secondary examination or equivalent and it should be from a school/institute/university recognized by the government.
Let us look at one example to know how section 80E deduction helped Shivam.
Shivam is a regular salaried IT executive living in Mumbai with his family. His 19-year old son, Aman is ready to pursue engineering from one of the reputed colleges in the country. Shivam took an education loan of 10 lacs to fund Aman’s college fees for 4 years. Aman is comfortably studying in his college with a secured career to look forward to. Shivam has taken the loan for a period of 6 years, and in this duration he can claim deduction of Interest paid on loan taken for higher education under section 80E.
An education loan indirectly supports in career-building by financing the crucial years of education. If you have taken an education loan and are in the process of repaying the same, then avail the tax benefit of Section 80E. This way you can save on some money while moving towards a successful career ahead.When the education is getting costlier and to many it is still a dream to continue studying after school, tax deduction sections like 80E have been indirectly supporting many such dreams.