Education Loan: The time of admission is going on in all the professional courses including this engineering. Many students take education loan for studies. If any child of your house has also taken an education loan, then it is important to understand about the tax exemption available on it. Before filing ITR, it is important for you to know about the rebates or exemptions available on it. You can avail tax exemption on the interest paid for the education loan.
Tax exemption can be taken on education expenses
You can avail tax exemption of up to Rs 1.5 lakh under section 80C of Income Tax for expenses incurred on education of two children. On the other hand, if you have more than two children, then you can claim this for any two children. You can take this exemption only on the expenses incurred for full time education. Apart from this, this exemption is only for tuition fees.
Benefit of tax exemption on education loan interest
You can avail tax exemption on the interest paid on education loan under Section 80E of the Income Tax Act. Important conditions for claiming such deduction are that the loan should be taken by a woman or her husband or children from a bank or financial institution for higher education (in India or abroad). One can claim this deduction from the year in which the loan starts repayment and for the next 7 years or before the loan is repaid, whichever is earlier.
Tax exemption will be available even if you take education loan for more than 1 child
If you have 2 children and you have taken an education loan for both, then you can avail tax exemption under section 80E on the interest paid for both the loans. There is no maximum tax exemption limit.
Understand by example
Suppose you have already taken an education loan for your daughter and you are taking advantage of tax exemption on the annual interest on it. Now if you are taking an education loan for your son’s education as well, then you can also take advantage of tax exemption on this.
If you have taken a loan of 10-10 lakhs at 10% interest for both, then the total annual interest of Rs 20 lakhs becomes Rs 2 lakhs. You will get the benefit of tax exemption on this entire 2 lakh interest. That is, out of your total taxable income, this amount will be minus.