Just like expenses incurred on school education bring you tax benefits, expenses on higher education also
fetch you tax deductions. If higher education is supported by education loan, then interest paid on it
can reduce your taxes. However, there are certain conditions that you must meet in order to get the benefit.
- Only individuals who pay interest on education loan can claim the benefit. The tax benefit
is not available to HUF.
- The benefit can be claimed by the parent as well as the child, which means that the person
who pays the education loan whether parent or child can start claiming this deduction.
- Deduction is available on education loan taken for self, spouse and children or someone for whom the
individual is a legal guardian.
- In order to get tax deduction, loan must be taken from a financial institution or
charitable institution recognized by central government.
- Loan taken from family, friends and relatives does not qualify.
- Tax benefit can be claimed on a loan taken for education anywhere in the world. It means that education
loan taken to pursue higher education in India as well as abroad qualifies for deduction.
- Loan should be taken for higher studies which means any full time graduate or post graduate course.
Full time courses which can be pursued after 10+2 are eligible for it.
- The deduction amount is only the interest paid on the loan taken for higher studies and there
is no upper limit. You can get tax benefit on entire amount of interest paid but
not the Principal amount.
- Deduction is only available if interest is paid out of income chargeable to tax (i.e., deduction
under this section cannot exceed the taxable income).
- The maximum period allowed to claim deduction is up to 8 years starting the year in which you
start repaying the interest on the loan or till the time interest is paid fully, whichever is less.
Did you know that tuition expenses you incur during education of your child can also be claimed
as deduction? The benefits are covered under section 80C. To know about it, read this comprehensive guide.