Navigating international education financing: The role of Section 80E in elevating student loan savings

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student loans to pursue their educational dreams. However, the burden of repaying these loans can be overwhelming. This is where Section 80E of the Indian Income Tax Act comes into play, elevating student loan savings and providing much-needed assistance.

It is a provision under Section 80E of the Income Tax Act that allows individuals to claim a deduction on the interest paid on their education loans. This deduction can significantly reduce the tax liability of the borrower, thereby providing financial relief. There is no specific upper limit for tax exemption.

However, the deduction allowed is limited to the amount of interest paid on a loan taken for higher education purposes. This deduction can be claimed for a maximum of 8 years or until the interest is fully paid, whichever is earlier. For example, let's say Mr.

Sharma has taken an education loan of Rs. 10 lakh at an annual interest rate of 7%. In the financial year, he pays an interest of Rs.

70,000. In this case, Mr. Sharma can claim a deduction of Rs.

70,000 under Section 80E. However, the deduction will only be available for a maximum of 8 years or until the loan is fully repaid. Individuals can avail a deduction on the total interest part of the Equated Monthly Instalments (EMIs) paid towards their education loan during the financial year.

There is no maximum limit on the deduction amount. However, to claim this deduction, individuals must obtain a certificate from their bank that clearly segregates the principal and interest portion of the education loan paid during the year. Only the total interest paid will be eligible for deduction, while no tax benefit is provided for the principal repayment.