Education has become one of the biggest investments for students and parents today. Many families take an education loan to manage higher studies in India or abroad. The good news is that the government provides income tax benefits on education loans under Section 80E of the Income Tax Act, 1961.
This blog will explain in simple words what are the benefits of education loan in income tax, who can claim them, how long they last, and provide examples with calculations so you can clearly understand how much you can save.
What Is Section 80E?
Section 80E of the Income Tax Act allows taxpayers to claim a deduction on the interest paid on education loans. This means the interest portion of your EMI is reduced from your taxable income, thereby reducing your total tax liability.
Key Point
- Only interest is deductible, not the principal amount.
What Are The Benefits of Education Loan in Income Tax?
1. Deduction on Interest Paid
You can claim the entire interest amount paid during the year as a deduction.
✅ Example:
- Suppose you pay an EMI of ₹15,000 per month.
- Out of this, ₹9,000 is interest and ₹6,000 is principal.
- Annual interest paid = ₹9,000 × 12 = ₹1,08,000.
If your annual taxable income is ₹7,00,000, your new taxable income will be:
₹7,00,000 – ₹1,08,000 = ₹5,92,000.
This reduction helps you save tax depending on your income slab.
2. No Upper Limit on Deduction
Unlike Section 80C (which has a limit of ₹1.5 lakh), Section 80E has no limit. You can claim the full interest paid, whether it is ₹50,000 or ₹5,00,000 per year.
✅ Example:
If you are paying ₹2,50,000 as interest in one year, the entire ₹2,50,000 can be deducted—there is no maximum cap.
3. Duration of Deduction – 8 Years
You can claim this benefit for a maximum of 8 consecutive years from the year you start repayment, or until you fully repay the loan, whichever is earlier.
✅ Example:
If your loan repayment period is 10 years, you can only claim the deduction for the first 8 years.
4. Eligible Borrowers
The deduction can be claimed if the loan is taken for:
- Yourself,
- Your spouse,
- Your children, or
- A student for whom you are the legal guardian.
This means parents can claim tax benefits if they take a loan for their child’s higher education.
5. Courses Covered
- Loan must be for higher education (after Class 12).
- Applicable for both Indian and foreign universities.
- Covers professional, vocational, and technical courses too.
6. Separate from Section 80C
Section 80E is independent of Section 80C. So, you can claim deductions under both sections if you qualify.
✅ Example:
- Section 80C deduction (Investments, tuition fees, etc.): ₹1,50,000
- Section 80E deduction (Interest on education loan): ₹1,00,000
- Total deduction = ₹2,50,000
Calculation Example – Tax Savings
Case Study
Mr. Arjun has a taxable income of ₹10,00,000. He pays ₹1,80,000 as interest on an education loan.
- Taxable income without 80E = ₹10,00,000
- Taxable income with 80E = ₹10,00,000 – ₹1,80,000 = ₹8,20,000
Tax Saving
If his income falls in the 20% tax slab, he saves:
20% of ₹1,80,000 = ₹36,000.
Thus, by claiming Section 80E, Arjun reduces his tax liability by ₹36,000.
Required Documents
To claim this deduction, keep the following ready:
- Loan sanction letter from the bank,
- Annual interest certificate,
- EMI payment proof.
These may not be required while filing the ITR but must be kept for verification.
Summary Table – Section 80E Benefits
| Feature | Details |
| Deduction | Interest paid on education loan |
| Limit | No maximum limit |
| Duration | 8 years from repayment start |
| Eligible | Self, spouse, children, legal ward |
| Loan Source | Only from banks/approved institutions |
| Courses Covered | Higher education in India or abroad |
| Separate from 80C | Yes – can claim both together |
Conclusion
Taking an education loan not only helps students achieve their dream of higher studies but also provides important tax benefits. Under Section 80E, you can claim a deduction on the entire interest paid for up to 8 years, without any upper limit. Parents can also avail this benefit if they take a loan for their child’s education.
So, if you are planning higher studies in India or abroad, remember that an education loan is not just financial support—it is also a smart tax-saving tool.