Study Loans : An Education Loan can be highly tax efficient for you

1. Study Loans

2. An Education Loan can be highly tax efficient for you

3. For most assesses, tax benefits typically revolve around Section 80C for insurance premiums and provident fund payments, Section 24 for interest on housing loan and Section 80D for payment of medical insurance premium. • These are normally the most commonly used sections in India. However, there is another very important and less talked about provision under Section 80E for interest paid on education loans pertaining to higher studies. • The beauty of this provision is that there is no upper limit for Section 80E and technically any amount can be claimed. • The only condition is that it should pertain to interest paid on an education loan taken for the purpose of higher studies.

4. Understanding the basics of Section 80E… • First and foremost it needs to be remembered that Section 80E pertains only to individuals and this benefit is not available to HUFs (Hindu Undivided Family). • Originally, this benefit was only available if you took the loan for your own education. • But subsequent to an amendment, the Section 80E also applies to interest paid on education loan taken for self, spouse and for children. • Interestingly, the benefit can also be claimed in case of children for whom you are the legal guardian under law, though they may not be you own children. • It needs to be remembered that Section 80E does not have any upper limit. The only condition is that the benefit can only be availed for interest paid on education loan and not for the principal repayment.

5. Additionally, the bank certificate also includes the detailed segregation of interest component for the full year and the principal component. • As mentioned earlier, the benefit of Section 80E is only available for interest component of educational loan and not for the principal component. • In short, Section 80E provides a very useful method to get a Study loans for higher education. Banks are a lot more flexible on giving loans for higher education and do not insist on too many documents. • At a time when higher education costs are going through the roof, this provides a very tax efficient way of financing higher education for yourself as well as your spouse and children. • Source: https://blog.religareonline.com/2016/01/28/an-education-loan-can-be-highly-tax-efficient-for-you/

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