Section 80E of ITA, 1961 : Section 80E: Deduction In Respect Of Interest On Loan Taken For Higher Education

Explanation using Example

Imagine a scenario where Raj is an individual taxpayer who has taken a loan from a recognized bank to finance his daughter's postgraduate studies. In the financial year 2022-2023, Raj pays an interest of INR 50,000 on this education loan.

Under Section 80E of the Income-tax Act, 1961, when Raj files his income tax return for the assessment year 2023-2024, he can claim a deduction of the INR 50,000 he paid as interest on the education loan. This deduction will be subtracted from his total income, thereby reducing his taxable income and the amount of tax he needs to pay.

Raj can continue to claim this deduction for a total of eight assessment years (the year in which he starts paying the interest and seven subsequent years) or until he has paid off the interest in full, whichever comes first.