January 30 , 2013
Loans that create assets earn tax rebates. Education loan is one of them. The entire amount you pay as interest on education loan can be claimed for income tax rebate. Here are few things to remember:
- Section 80E gives rebate for interest payment of education loan for higher education. Principal amount cannot be claimed for rebate.
- Education loan should be taken for self, spouse, children or someone whose legal guardian you are. It cannot be claimed for education loan for siblings or other relations.
- Higher education implies course after 12th class. It includes full time graduate or post graduate courses in engineering, medicine, management or post graduate courses in pure sciences including mathematics and statistics.
- Education loan should be taken from a bank, financial institution or a recognized charity organization.
- Tax benefit can be claimed for the year repayment starts and maximum of 7 years following.
Your income for the year can be reduced by the amount of interest on education loan paid in that year. Put the interest amount in the cell for section 80E rebate falling under Chapter VI A Deductions in the ITR form. Your bank statement would contain break up of interest and principal payments.