Rising cost of education has made many individuals opt for education loans. If you have availed of an education loan, then the interest you pay is eligible for deduction under section 80E of the Income Tax Act.
Expenditure on education can fetch you tax breaks in two ways.
Payment made towards the tuition fee is eligible for tax deduction under section 80C of the Income Tax Act. A parent can enjoy the tax deduction for tuition fee paid to any school, college or university. A payment up to Rs 1.5 lakh per financial year is allowed as eligible expense under the said section along with other eligible investments such as contribution towards employee provident fund, public provident fund, life insurance premium, national saving certificate, equity linked saving scheme.
However, this deduction is allowed for the payment of tuition fees only. You won’t get any tax break for other payments made to school on account of development fund, capitation fee, building fund or under any other head or even payments made to private tuition or coaching classes. You can avail of this benefit only for two dependent children. The educational institution to which the fee is paid, must be based in India and the course should be a full time course.
Interest paid on education loan
Rising cost of education has made many individuals opt for education loans. If you have availed of an education loan, then the interest you pay is eligible for deduction under section 80E of the Income Tax Act. The education loan can be taken for yourself, your spouse or your children. You can also avail of an education loan for whom you are a legal guardian and claim tax benefits on the interest paid.
The education loan must be taken from a financial institution or a charitable institution. The interest can be claimed for eight years in a row or the loan repayment term whichever is lower, starting from the year in which the repayment begins.
You have to get a certificate from the lender specifying the amount of interest you paid in a financial year. There is no cap on the interest amount you can claim under this section. However, there is no benefit for the principal repaid by you to the lender.In an education loan, parent and the student are co-borrowers. As this section allows an individual to claim tax benefit for both self and the children, the best idea would be to claim tax deduction by the parent in initial years. And when the child takes up the job, the child can claim deduction. At any given moment of time, only one person can claim tax benefit.The Great Diwali Discount!
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