Deduction Under Section 80C & 80E With Respect To Education

Deduction under section 80C: 

Deduction is available to the individual assessee on payment of tuition fees for the purpose of whole time education in India to: 1. School, 2. College, 3. University, or 4. Any other educational institution, at the time of the admission or thereafter. This deduction under section 80C is available for maximum 2 children of the assessee wherein adopted children and step children are also included. This provision clearly reflects the ideals of Government to encourage people to educate their children. However, the deduction is not available for any payments towards any development fees, donations or any other payment of similar nature. Similarly, if the payment is made for the part time education or the correspondence course, deduction is not allowed. Note: Deduction under section 80C combined with deduction under section 80CCC and 80CCD is limited to Rs. 1,50,000/- 

Income Tax Deduction under Section 80E:

Deduction is allowed to individual assessee in respect of interest on loan taken for higher education of self, spouse, children or any other person for whom the assessee is legal guardian. Loan can be taken for education in India or abroad. Deduction is available only for the interest part of the installment and not the principal part. There is no threshold limit in respect of interest rate on which the deduction is allowed or the amount of interest payment amount that can be allowed as deduction. However, this deduction of interest is allowed for the maximum period of 8 years starting from the year in which the assessee makes payment of first interest installment.

Conditions for availing deduction under section 80E of Income Tax Act, 1961:

1. Deduction is available only for the interest on loan for higher education which means any course of study which is pursed after passing the Senior Secondary Examination or its equivalent from any school, board or university recognised by the Central Government or State Government or local authority or by any other authority authorised by the Central Government or the State Government or the local authority to do so. 2. Loan should be taken from any bank, financial institution notified by Central Government by way of notification in the Official Gazette explicitly in this regard or by any other approved charitable institution by Central Government. Therefore, assessee is not eligible to claim deduction under this section if the loan is taken from the family, friends or even employer. So, these are the two deductions under section 80C and 80E of the Income Tax Act, 1961 that the Government allow from the Gross Total Income of the assessee as a means to encourage not only the primary and the basic education in India but also the higher education. You can claim these deductions if you fulfil the conditions as mentioned above.   

Author Bio: Radhika Daga, B.COM (H), CA-Final. Connect with her on Linkedin @www.linkedin.com/in/radhikadaga.