Save Big on Education Loan Interest: Section 80E Guide

What’s Section 80E All About?

Section 80E is basically the government’s way of saying, “Hey, we know education is expensive, so here’s some relief.” If you’re paying interest on an education loan, you can claim the entire interest amount as a deduction from your taxable income. That’s right—there’s no upper limit. Paid ₹2 lakh in interest this year? You can claim the whole thing. No caps, no hidden catches.

Who Can Actually Claim This Deduction?

Here’s the deal: only individuals can claim this benefit. So, if you’re part of a Hindu Undivided Family (HUF), a company, a partnership, or any group setup, sorry—this one’s not for you. But if you’re an individual who took a loan for:

• Yourself
• Your spouse
• Your children
• Someone you’re a legal guardian for

—you’re in luck. Parents, you can claim the deduction even if the loan is for your child’s education. That’s a big win for families supporting their kids’ dreams.

How Much Can You Deduct?

Unlimited Deduction

The best part? There’s no upper limit. Whatever you pay as interest in a financial year, you can claim it all. This is way better than Section 80C, which tops out at ₹1.5 lakh.

Only the Interest Counts

Don’t get tripped up here: only the interest part of your EMI is eligible. The principal repayment? That doesn’t count for Section 80E. For example, if you pay ₹1.8 lakh in EMIs and ₹1.2 lakh is interest, you can only claim the ₹1.2 lakh.

Real-Life Example

Rajesh Sharma from Bangalore took a ₹15 lakh loan for his daughter’s engineering degree. His annual EMI is ₹1.8 lakh—₹1.2 lakh is interest, ₹60,000 is principal. He can claim only the ₹1.2 lakh interest, which could save him ₹36,000 in taxes if he’s in the 30% bracket.

What Are the Payment Rules?

You can only claim the deduction for interest you’ve actually paid during the year. No points for accrued or future interest. And the payment must come from your taxable income.

A Bit of History

Before 2006-07, you could only claim this deduction for your own studies. Now, it covers loans for your spouse, kids, and legal wards. The law’s become a lot more family-friendly.

Where Should the Loan Come From?

Not all loans qualify. Your education loan must be from:

A bank covered under the Banking Regulation Act, 1949

Any other financial institution specified by the government

An approved charitable institution

Loans from friends, relatives, or unregistered lenders? Those don’t count.

What Counts as “Higher Education”?

Section 80E covers any course after your Senior Secondary Exam (12th grade or equivalent). Thanks to a 2009 amendment, this now includes:

Regular academic courses (engineering, medicine, management, etc.)

Vocational training

Professional certifications

Diplomas and degrees

The institution must be recognized by the government or an authorized body. And yes, this applies to studies in India or abroad.

Who’s a Legal Guardian?

From 2010-11, you can claim the deduction for students you’re a legal guardian of. This includes:

Court-appointed guardians

Natural guardians (as per personal law)

Anyone with legal custody

How Long Can You Claim the Deduction?

You get this benefit for up to 8 consecutive years—starting from the year you begin repaying the interest, plus the next seven years. If you finish paying off the loan sooner, the deduction stops then.

Example

Priya Patel from Mumbai started repaying her ₹10 lakh loan in 2020. She can claim deductions from 2021-22 to 2028-29. If she pays off the loan in 2026, she only gets the deduction for 6 years.

Whose Name Should the Loan Be In?

The loan must be in the name of the person claiming the deduction. So:

If parents take the loan, parents claim the deduction.

If the student takes the loan, the student claims it.

Spouses can’t claim for each other’s loans.

For joint loans, whoever pays the interest can claim the deduction for their share.

What Expenses Are Covered?

Section 80E isn’t just about tuition. It covers:

Tuition and college fees

Hostel charges

Transportation

Books and study materials

Equipment and lab fees

Exam fees

Other incidental education expenses

Section 80C vs. Section 80E

Don’t mix these up! Section 80C (with its ₹1.5 lakh cap) is for tuition fees you pay directly—not for loan repayments. Section 80E is for the interest on education loans, with no cap. Smart taxpayers use both: 80C for direct tuition payments, 80E for loan interest.

What Documents Do You Need?

To claim Section 80E, you’ll need:

An annual certificate from your lender showing the split between principal and interest

Loan sanction letter

Loan agreement

EMI payment receipts

Bank statements showing payments

Admission documents from the educational institution

Old vs. New Tax Regime

Section 80E is only available under the old tax regime. If you opt for the new regime, you can’t claim this deduction. If you’re paying a lot of interest, it might make sense to stick with the old regime.

What’s New for 2024-25?

ITR forms now have new fields for education loan deductions—fill them out carefully!

The tax department is watching Section 80E claims more closely, so make sure your paperwork is solid.

Common Mistakes to Avoid

Don’t claim principal repayments under Section 80E.

Don’t claim interest you haven’t actually paid.

Don’t try to claim if you’re under the new tax regime.

How Much Can You Save?

Let’s look at Dr. Amit Kumar from Delhi. He took a ₹25 lakh loan for his son’s MBBS abroad:

Annual income: ₹12 lakh

Annual interest: ₹1.8 lakh

Tax bracket: 30%

Annual tax savings: ₹54,000 (1.8 lakh × 30%)

Over 8 years: ₹4.32 lakh (if interest stays the same)

Tips to Maximize Your Section 80E Benefits

Take the loan in the name of the highest earner in the family for maximum tax savings.

Try to repay within 8 years to get the full benefit.

Keep digital copies of all documents.

Ask your lender for the annual interest certificate every year.