21 July 2009

Deduction in respect of loans taken for higher education. Sec 80E

Deduction in respect of interest on loan taken for higher education is available under Sec 80E of the Income-tax act. The details of the deduction are as under;
  1. The deduction is available in computing the total income of the assessee,
  2. The assessee must be individual only, no benefit is available to HUF or assessee of any other status,
  3. The interest amount must be paid during the previous year, i.e. accounting year in relation to which return is filed, and interest must be paid out of taxable income,
  4. From AY 2006-07, no deduction is available on repayment of principal amount,
  5. Loan must be taken for higher education of the assessee or his relative. Higher education means full-time studies for the graduate or post-graduate course in engineering, medicine, management or for post-graduate course in applied sciences or pure sciences including mathematics and statistics,
  6. Loan must be taken form financial institution or approved charitable institution. Financial institution means banking company or other financial institute notified by the Government. Approved charitable institution, means institution established for charitable purpose and notified by the government,
  7. Loan must be taken for higher education of of the assessee or relative of assessee. Here relative means spouse and children.
  8. The Deduction will be available in computation the total income in respect of the initial year and subsequent seven assessment year succeeding the initial assessment year or until the interest referred above is paid by the assessee in full, whichever is earlier.
  9. "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.