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Tax exemption

Anand (MBA) (26 Points)

15 August 2016

Hi,

I had taken 2 personal loans for funding higher education of my wife. Can I claim Tax exemption on the interest amount paid for the loans?

Thanks

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6 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (178346 Points)
Replied 15 August 2016

Sorry, not possible

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Udgam Koomar (Tax Technologist) (1949 Points)
Replied 15 August 2016

Personal loan not applicable

Abhimanyu (CA) (316 Points)
Replied 15 August 2016

Dear Anand,
Thanks for the query,
Now, first may I take this opportunity to disagree with fellow CCI members,
My view on this issue is positive and act would also not bar you from claiming deduction for the interest paid, since requirement of the act is of taking loan from FIs, banks etc.

Abhimanyu (CA) (316 Points)
Replied 15 August 2016

*in continuation

it never said that the loan should be headed as Education loan in bank papers etc. it is just a product of bank viz. other types of loans like CC, OD etc with different terms and conditions basically interest rate, "education loan" tagged loan might have lessor rate or defer payment schedule etc.
IT act would not ask you to take specifically tagged loan as per present law only need is the UTILISATION OF YOUR LOAN
make sure to keep a solid link between your wife's education expense and loan so that you can illustrate the link if asked by IT deptt. later, just in case they ask for, which I think has 25% probability or maybe lessor.
So go ahead and claim the Interest deduction.
Thanks,
Abhimanyu

Should you have any issue please revert.

CA Harshal Totla (Chartered Accountant) (2229 Points)
Replied 15 August 2016

Deduction u/s 80E in respect of interest on education Loan can be taken only if Loan have been taken for the purpose of pursuing higher studies of Individual , Spouse, Children of Individual or of the student of whom individual is legal Guardian. The provison clearly mentions that "loan should be taken for the purpose of pursuing higher education". I totally agree with the view of Mr.Abhimanyu, the clear intent of the provision is that loan should have been taken for the purpose of higher education funding. Tagging of loan as education loan is not the intent of this provision. If you are in a position to explain that such loan is taken for the stated purpose only and is utilised as such then you should go ahead and claim deduction.
However, alternate views are possible as there seems to be a lacuna in the provison but looking into the main intent,above mentioned view is more concrete.
Thanks