Who can claim the deduction under Section 80E?

Individual taxpayers can claim it, including parents for their children’s education, but not HUFs or other types of taxpayers.

What are the eligibility criteria for claiming a deduction under Section 80E?

The loan must be taken from a bank, financial institution, or approved charitable institution, and the taxpayer must be under the old tax regime.

How long can the interest on an education loan be claimed as a deduction?

The interest can be claimed as a deduction for up to 8 years from the start of repayment.

Can loans from family or friends qualify for the deduction under Section 80E?

No, loans from family or friends do not qualify for the deduction.

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How To Get Tax Benefits On Education Loan Under Section 80E Of the Income Tax Act?

Q: What is Section 80E of the Income Tax Act?

Section 80E is a tax deduction on the interest paid for education loans, not the principal amount.

Pragya Pathak

Author

Updated: 04-04-2025 at 3:30 PM

Financing funds for higher studies is a tedious job. As we all know, getting an education loan or student loan helps ease the financing process, but did you know you can get a deduction of the interest payments? This article will help you understand how to avail yourself of this deductible and help you reduce your tax as well.

Overview

Name of the section	Section 80E of the Income Tax Act
Objecitve	It is a tax deduction on education loans/student loans
Deduction on	Interest in EMIs
Principal deduction	None
Eligibility criteria	Only for people not HUFs
The loan to be taken for	Children, spouse, legal ward, or self

What Is Section 80E Of The Income Tax Act?

Section 80E of the Income Tax Act is a tax deduction on education loans/student loans. It is a tax incentive given to people pursuing higher studies with the help of an education loan. This helps in the deduction of the interest amount paid on the loan and not on the principal amount.

The taxpayers will only have to focus on paying the principal amount back and not worry about the interest payment.

Who Can Claim This Deduction?

The below-mentioned points showcase detailed information about the ones who can claim this deduction:

Only an individual taxpayer can claim the deduction, i.e., HUF or other kinds of taxpayers cannot claim the deduction.
The individual's spouse or children, or a student for whom the taxpayer is a legal guardian.
Parents can claim this deduction for their children's higher studies.
The taxpayer must be under the old tax regime to claim the deduction on the education loan.

Deduction Under Section 80E

To claim a deduction under Section 80E, one must take a loan from any bank, financial institution or any approved charitable institution. Loans taken from family or friends will not qualify for the deduction.

The person taking the loan must obtain a certificate from the bank, financial institution, or approved charitable organisation from which the loan was taken. This certificate should show in detail the principal amount and the interest amount of the education loan for the financial year.

Where Can Education Loans Be Taken?

You can only claim a deduction under Section 80E of the Income Tax Act if the education loan is taken from one of the following sources:

Banks
Financial institutions
The listed charities
Borrowings from friends and relatives cannot be used to meet the requirements of this code section.

What Is The Purpose Of Education Loan?

To avail of this tax deduction as per Section 80E of the Income Tax Act, the mentioned loan has to be taken for pursuing higher education only. This includes:

Education received after exams of senior secondary curriculum (12th standard).
Both the routine and vocational courses, whether one wants to study in India or any foreign country.

Section 80E Tax Exemption Limits

The below-mentioned points showcase the detailed information about the Section 80E tax exemption limits: -

Interest Deduction: When it comes to education loans, only the amount of interest is allowed as a deduction.
No Limit: In fact, there is no maximum limitation regarding the amount of interest that you can claim in the one fiscal year of the company.
Example: Where you get ₹6.7 lakh and pay ₹2 lakh in interest, you can be taxed on ₹4.7 lakh.

What Are The Eligibility For Claiming 80E Deduction?

To qualify or to be eligible for claiming the deduction of Section 80E of the Income Tax Act, the following points need to be checked:

Interest-only Deduction

Interest on education loans only is allowed as a deduction and not the actual loan amount.

Eligible Borrowers

This deduction is only available to individuals. Here, it is also incumbent to note that Hindu Undivided Families (HUFs) and companies cannot invest in the FDI.

Approved Lenders

The loan must be from any accredited bank, financial house, or approved charitable organisation. Getting a loan from friends or relatives does not count.

Higher Education

The loan has to be availed for educational purposes, and the education has to be after the 12th standard.

Maximum Deduction Period

This one you can use against your income for up to 8 years, or until the specific loan itself has been paid off fully, whichever comes first.

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Documents Required To Claim Deduction Under Section 80E

The documents necessary for claiming a deduction under Section 80E are some sort of certificate, and to claim the tax deduction, you need the following documents:

Certificate from the Bank/Financial Institution/Charity: This certificate must indicate the principal and interest parts of the education loan paid in the financial year.

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Period Of Deduction

The deduction commences in the year that you start paying for the loan. The maximum duration of this is the amount that you can claim for a maximum of 8 years. However, if the loan is repaid before 8 years, the individual is only allowed to claim the deduction for the years such repayment was made.

Example: If you refinance the loan and repay it in the next 5 years, you are allowed the deductions for 5 years only.

Education Loan Interest Deduction Under Section 80E (Illustrative Example):

The interest amount of the EMI is only eligible for deduction, not the principal amount. There is no upper limit that can be claimed under Section 80E.

Let us break it down in a simple manner.

Financial Year	Interest Paid (₹)	Deduction Claimed (₹)
2023-24	50,000	50,000
2024-25	60,000	60,000
2025-26	70,000	70,000
2026-27	80,000	80,000
2027-28	90,000	90,000
2028-29	1,00,000	1,00,000
2029-30	1,10,000	1,10,000
2030-31	1,20,000	1,20,000

They can claim all the interest paid over the years up to the 8th year. After the 8th year, a person cannot claim any deductible.

Who Can Avail Of Tax Deduction Under Section 80E?

The following points showcase the details of the ones who can avail of the tax deduction under Section 80E of the Income Tax Act:

Interest Deduction: When it comes to this type of loan, only the interest payment is permitted for the deduction, not the principal amount.
Eligible Claimants: It can be claimed only by an individual and not by any HUF or any company.
Loan from Approved Sources: The loan has to be taken from a bank, financial institution or any registered charitable organisation. Loans from friends/relatives is not allowed.
Purpose: The loan should be taken for financing higher education after writing the senior secondary exam.
Maximum Duration: You can claim on deduction for up to eight years or until the loan is fully paid.

Tax Benefits Under Section 80E

Section 80E is another section that provides an additional deduction over and above the deduction of ₹ 1,50,000 allowed under Section 80 C. This is good for the taxpayers, especially those who fall under the provision of Section 80C and also have an education loan or student loan.

Why Some Individuals Prefer an 8-Year Repayment Period

The Reason Why Some People Prefer that the Repayment Period is 8 Years is as follows:

Tax Benefits: Most of them prefer the full 8-year tenure to claim the maximum deduction allowed under Section 80E.
Investment Opportunity: Rather, it is used to pay back the loan only when he or she decides to make an early repayment of the surplus income to build wealth.

What Are The Advantages of Paying Off Loans Early?

The following points showcase the reasons why it is wise to pay loans earlier:

Freedom from Debt:

Early repayment removes the pressure that is attached to EMIs and, in a way, lessens financial pressures.

Avoiding debt traps:

The main reason is the possibility of avoiding falling into the so-called ‘debt trap’ when one has to pay back much more than he/she needs or can afford.

Improved Credit Score:

Repaying credit on time increases credit rating because, when looking for additional credit in the future, one will qualify easily for credit.

Reduced Interest Cost:

Prepaying for the loans has the benefit of lowering the cash paid towards the interest charged in the long run.

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Key Considerations

Extending the repayment horizon can bring in the optimum utilisation of the tax shield and yet may lead to a higher interest outgo.
Early repayment guarantees financial liberty and enhances creditworthiness.
Select a plan depending on financial readiness and aims.

Terms and Conditions For Claiming Section 80E Deduction

To avail yourself of tax benefits under Section 80E of the Income Tax Act, keep these points in mind:

Eligibility:

The loan has to have been taken for yourself or your biological or adopted children or ward if you are a legal guardian of the child.
That loan is not availed of by the employer or relatives so they do not claim any deduction under Section 80E.

Who Can Claim:

Section E also shows that only individuals can set off deductions.
Firms, Hindu Undivided Families, a HUF, and companies are not allowable.

Applicable Period:

Deduction of the amount is permitted only to the extent of the interest component of the loan.
It also gives claim benefits for a maximum period of 8 years or until all the interest is met, whichever is earlier.

Conclusion

Section 80E of the Income Tax Act aims to make education more accessible to everyone. This benefits not just students but also anyone who wants to pursue higher education. This is the government’s one significant step taken to provide easy access to education loans and offer tax benefits.

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