Substitution of new section for section 80E
Q. Who is eligible for deduction u/s 80E?
A. Loan should be taken by individual for pursuing higher education of self,
spouse or his /her Children’s. Hence parents are also eligible to claim deduction
of interest paid by them on loan taken for their children’s education. This
deduction is not available to HUF.
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Q. What is eligible amount?
A. Only interest paid on an educational loan is allowed as deduction u/s. 80E of
The Income Tax Act, 1961, out of his/her income chargeable to tax i.e.
Deduction will be allowed only when actual interest is paid.
Q. How much amount is deductible?
A. There is no limit for amount of repayment of interest. Unlimited amount of
interest can be deducted under this section. However there is no benefit
available on the repayment of principal amount of the loan. The assesse can
claim the amount of interest in the initial assessment year & carry forward up to
7 assessment years.
Deduction is allowed for a continuous period of eight years, starting with initial
assessment year in which the assessee starts paying the interest on the loan or
until the interest is paid in full whichever is earlier.
Q. Can loan be taken for any education?
A. The loan should be taken for the purpose of higher education.
Q. Can higher studies be pursued outside India?
A. There is no condition that the course should be in India.
Q. Can loan be taken from relatives?
A. The loan should be taken from any financial institution or any approved
charitable institution. Interest on Loan taken from relatives or friends will not be
eligible for deduction under section 80E.
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Below given the actually says by the Income Tax Department about the U/S 80E
25.
For section 80E of the Income-tax Act, the following section shall be
substituted with effect from the 1st day of April, 2006, namely:—
‘80E. Deduction in respect of interest on loan taken for higher education.— (1) In
computing the total income of an assessee, being an individual, there
shall be deducted, in accordance with and subject to the provisions of
this section, any amount paid by him in the previous year, out of his
income chargeable to tax, by way of interest on loan taken by him from
any financial institution or any approved charitable institution for the
purpose of pursuing his higher education.
(2)
The deduction specified in sub-section (1) shall be allowed in
computing the total income in respect of the initial assessment year and
seven assessment years immediately succeeding the initial assessment
year or until the interest referred to in sub-section (1) is paid by the
assessee in full, whichever is earlier.
(3) For the purposes of this section,—
(a)
“approved charitable institution” means an institution specified in,
or, as the case may be, an institution established for charitable
purposes and notified by the Central Government under clause (23C) of section 10 or an institution referred to in clause (a) of sub-section (2) of section 80G;
(b) “financial
institution” means a banking company to which the Banking Regulation
Act, 1949 (10 of 1949) applies (including any bank or banking
institution referred to in section 51 of that Act); or any other
financial institution which the Central Government may, by notification
in the Official Gazette, specify in this behalf;
(c)
“higher education” means full-time studies for any graduate or
post-graduate course in engineering, medicine, management or for
post-graduate course in applied sciences or pure sciences including
mathe-matics and statistics;
(d)
“initial assessment year” means the assessment year relevant to the
previous year, in which the assessee starts paying the interest on the
loan.’.
