Have you taken an education loan to support your higher studies and are not aware of the tax benefits that you are entitled to. Then here is a guide that will assist you to know tax benefits on education loans. These benefits help you to reduce the overall cost of your education loan.
First and foremost it should be noted that tax deductions on education loan can only be claimed if the loan has been taken in your own name. If your parents, spouse or sibling has taken the loan for your studies, then you are not entitled to get tax benefit. The tax benefit is only valid for the person who has taken loan for his own education. So given that the education loan is in your name and you have started repaying it, tax benefits can be availed.
If you have taken an education loan, you can claim a deduction under section 80 E of the Income-Tax Act for the interest paid on the loan. The amount of interest paid is eligible for deduction and moreover there is no cap on the amount to be deducted. You can deduct the entire interest amount from your taxable income. However there is no benefit available on the repayment of principal amount of the loan.
Earlier there was a restriction on the tax benefit to be deducted from the income. Only Rs 40,000 per year or total amount that included both the principal and interest paid during the year, whichever is lower, was allowed as a tax benefit.