(H) Deduction Of Interest On Loan taken on Higher Studies — Section 80E

The following are salient features of section 80E –

1. Who can Claim Deduction under Section 80E-

Only an individual can claim deduction under section 80E.

2. What is the Qualifying Expenditure for availing Deduction under Section 80E-

If loan is taken by an individual for any study in India or outside India (i.e., any study after passing senior secondary examination or its equivalent) from a bank, financial institution or an approved charitable institution, interest is deductible in the year in which interest is paid.

3. For whose Education Loan should be taken to get Deduction U/s 80E-

Interest is deductible if loan is taken for pursuing assessee’s own education or for the education of his relatives (i.e., spouse, children or any student for whom the individual is the legal guardian).

4. Maximum Monetary Ceiling U/s 80E-

Entire interest is deductible in the year in which the assessee starts paying interest on loan and subsequent 7 years or until interest is paid in full. However, interest should be paid out of income chargeable to tax.

5. Quantum of Deduction under Section 80E :

The amount paid during previous year towards INTEREST.

6. Period of Deduction under Section 80E :

Deduction shall be allowed for 8 assessment years starting from the assessment year in which the assessee starts paying the interest on loan, or until the interest thereon is paid by the assessee in full, whichever is earlier.

7. Meaning of Higher Education for the purpose of Deduction U/s 80E :

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.

8. Meaning of Relatives for the purpose of Deduction U/s 80E :

Relative in relation to an individual, means the spouse and children of that individual or the student for whom the individual is a legal guardian.