11 March 2014
Only interest paid on an educational loan is allowed as deduction u/s. 80E of The Income Tax Act, 1961, out of his/her income chargeable to tax i.e. Deduction will be allowed only when actual interest is paid. Loan should be taken by individual for pursuing higher education of self, spouse or his /her children’s. Hence parents are also eligible to claim deduction of interest paid by them on loan taken for their children’s education. Loan should be taken from approved financial institution or from institution established for charitable purposes and approved by the prescribed authority under clause (23C) of section 10 or an institution referred to in clause (a) of sub-section (2) of section 80G. Loan should be for full-time studies for any graduate or postgraduate course in engineering, medicine, management or for post-graduate course in applied sciences or pure sciences including mathematics and statistics Deduction is allowed for a continuous period of eight years, starting with initial assessment year in which the assessee starts paying the interest on the loan or until the interest is paid in full whichever is earlier.
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