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80E- Deduction in respect of interest on loan taken for higher education

                            [Updated as on Dec 31, 2019]

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• Deduction is available to an individual assessee.

• Any amount paid by way of interest during the previous year by the assessee on loan taken by him for the purpose of pursuing his higher education or for the purpose of higher education of his relative shall be eligible for deduction under this section.

• Higher education for this purpose 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.

• Relative includes spouse and children of the assessee or any student for whom the assessee stands as legal guardian.

• Loan may be taken from any financial institution or any approved charitable institution.

• Financial institution means banks including subsidiary banks and regional rural banks or any other financial institution which the Central Government may, by notification in the Official Gazette, specify in this behalf.

• Approved charitable institution means an institution established for charitable purposes under clause (23C) of section 10 or an institution referred to in clause (a) of sub-section (2) of section 80G.

 

 

Amount of deduction

 

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• The amount of eligible deduction shall be the interest amount paid on the loan during the relevant previous year.

• The deduction shall be available from the assessment year relevant to the previous year in which the assessee starts paying interest on the loan and for the seven succeeding assessments years or until the interest is paid in full by the assessee whichever is earlier.

 

Illustrations on Section 80E

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1.  Sonu had taken a loan for the education of his son in FY 2010-11 for which he has paid installment of Rs.135000 during the FY 2018-19 which comprised of principle amount of Rs.80000 and interest amount of Rs.55000. What is the amount of deduction eligible under Section 80E?

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        Deduction under 80E shall be available from the assessment year relevant to the previous year in which the assessee starts paying interest on the loan and for the seven succeeding assessments years or until the interest is paid in full by the assessee whichever is earlier. Here the assessee could claim exemption from AY 2011-12 till AY 2018-19 only. Hence, he is not eligible for deduction for AY 2019-20 (FY 2018-19).