Skip to main content

Education Loan: Loan to study, Save Tax Later. Repayment comes with tax breaks

‘UPON THE Education of the people of the country, the fate of the country depends.’


Our country seems to have taken the wise words of UK’s inter-war year’s Prime Minister Benjamin Disraeli in true spirits. Given the high level of illiteracy in the country, and the need to ensure that Indians are as competitive as their global peers, the government has been taking steps to boost education sector.


While the government has been raising the budgetary allocation for education every year and has also imposed 3% cess to promote primary and secondary education in the country, it also provides tax breaks for those who are pursuing higher education.

Section 80E of the Income Tax Act is in fact a boon for students who wish to undertake graduation and post graduation courses in various educational fields. Rising cost of education has forced most students to take loans to pursue their dreams. Section 80E, thus, ensures that any interest paid on these educational loans is exempt from income tax.

Unlike the interest rate on housing loan, there is no limit attached to the quantum of interest paid during the year. Thus, any amount of interest paid on education loan is exempt from tax, provided the loan has been taken from a financial institution or any approved charitable institution.

However, while exemption for repayment of interest on housing loan stretches through the entire period of repayment, in the case of education loans, it is restricted to eight consecutive years. The eight-year count begins from the first year, when the student actually begins to repay the loan.

Earlier, the exemption under Section 80E was restricted only to the students, who had taken loan to pursue higher education. This was a major anomaly in this section, since in most cases, it is not the students but their parents, who take loan for the education of their children. The anomaly was removed by the Finance Act 2007, wherein the exemption under this section was extended even to the relatives. Thus, now if the loan has been taken and is being repaid by the parents or even the spouse of the individual, they will also be entitled to claim exemption under the section.

Also, it is not just the higher education that has attracted tax-incentives in the country. Individuals paying their own tuition fees or parents paying tuition fees for their children in schools, colleges or universities can claim an exemption for the same from their taxable income. However, there is no separate section for this exemption and the same has been clubbed under the Rs 100,000 limit of Section 80C. It is important to note that this exemption is available only for the tuition fees. Any other expenditure in the nature of development fees or donations shall be disallowed. Besides, this exemption has been restricted to payment of tuition fees to Indian educational institutions only.

Popular posts from this blog

ICICI Prudential Dynamic Plan Invest Online

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   ICICI Prudential Dynamic Plan             Invest Online This fund does remarkably well during falling markets, but fails to show the same prowess during a rising market. The fund sticks to its mandate to adapt to the dynamic nature of the market by shuttling between debt and equity. It takes aggressive asset calls in equity when the market surges by investing in quality mid-cap stocks. At the same time, it adopts a defensive strategy by investing in debt and cash when markets get overvalued, making it a good long-term choice.     For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call     Leave a missed Call on 94 8300 8300   Leave your comment with mail ID and we will ...

Lump Sum or SIP?

Invest Mutual Fund Online     You have a lump sum in hand and you wish to invest in equity funds. However, you have heard a lot of talk about investing in equity funds through Systematic Investment Plans (SIPs) because they help average costs, ensure you do not ill-time the market, and help you invest in small sums, besides giving you many other advantages. So, should you invest the money you have in hand in one go, or let it remain in your bank account and then do an SIP? There is no harm in investing a lump sum amount. For all you know, compounding, over the long term, could work better with lump sum. However, make sure you fulfill all of these three criteria if you want to invest in one go. Else, SIP is the way to go. #1: You invest for the long term According to past data, ideally, if you have a time frame of 12 years or more, you can consider lump sum investing (provided you satisfy the other two conditions that follow). So, what is the sanctity behind 12 years? Is it because only...

Birla Sun Life MIP II Savings 5

  Birla Sun Life MIP II Savings 5 - Invest Online   Have you traditionally been a debt investor but now wish to test waters in equities? Then, debt-oriented funds such as Birla Sun Life MIP II Savings 5 (Birla Savings 5), which have limited exposure to equities, may fit your requirement. With a five year return of 10.5 per cent compounded annually, the fund managed a good 3-3.5 percentage points more than its benchmark Crisil MIP Blended Index, as well as its category average. The fund appears well poised to capitalise on a falling interest rate scenario and has increased the average portfolio duration of its debt instruments in recent times. Suitability Birla Savings 5 is suitable only for conservative investors. If you want to make a beginning in equities and cannot take any short-term declines in your stride, then this fund will suit you. If you are already an equity investor and want to use a debt-oriented fund merely as a diversifier, then you may prefer peers from the HDFC and Re...

Index funds / Exchange Traded Funds

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 Index funds / Exchange Traded Funds Index funds are those funds which replicate a particular stock market index like Nifty, Nifty Junior, Sensex etc. The fund's composition is a mirror image of the index. As there is no active management involved and the fund is expected to generate what a particular index is generating, the fund management charges are very low in these funds. Though over a long period of time good active management does play its part, but many times it has been seen that due to wrong calls of fund manager mutual fund returns suffer very badly. It is then we repent paying heavy charges for fund management. So, to diversify fund manager risk one may look at index funds too. Exchange traded funds also come under this category. As they can on...

Mutual Fund Review: Reliance Regular Savings Balanced

Reliance Regular Savings Balanced fund has shown great resilience during market crash After a shaky start, this fund has established itself as a strong contender in this space. In the past three years it has ridden the market well by not only delivering during the market run-ups but also displaying resilience during the crash. In 2008, it witnessed the second lowest fall among its category and last year it was amongst the top three performers with a return of 76 per cent (category average: 61%).   The poor underperformance in 2006 can well be credited to the low equity allocation of the fund, which stood at just over 10 per cent for only four months that year. Though the fund has the leeway to go up to 75 per cent in equity, it has never touched that limit. In fact, it has exceeded 70 per cent in just five months in its entire history. During the crash of 2008, the fund managers had no problem going right down to 54 per cent (equity exposure). Fund managers Omprakash Kukian and A...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now