The Hindu Business Line : Deduction on education loan

MY DAUGHTER has joined the BDS course for which I have paid the tuition fees. For this purpose I have taken an education loan from the bank. The loan is in the joint names of my daughter and me. I pay the interest and principal. Will such payment of interest and principal make me eligible for a deduction under the Act? Will I be eligible for rebate under Section 88 in respect of the tuition fee paid? - V. D. Rajan

Reply

No deduction can be claimed by you in respect of the repayment of principal and payment of interest. However, rebate under Section 88 can be claimed in respect of the tuition fee that is paid.

The deduction under Section 80E, which is available for repayment of a loan along with interest on such loan for the purpose of higher education, is available for taking up any fulltime graduate or post-graduate course in engineering, medicine, management or for a post-graduate course in applied science or pure science, including mathematics and statistics.

Deduction under Section 80E is available only if the following conditions are satisfied: a) the assessee is an individual; b) the assessee has, out of his income chargeable to tax, repaid a loan or the interest thereon taken from any financial institution or approved charitable institution; and c) the loan has been taken for pursuing the assessee's higher education.

The deduction shall be the amount repaid by way of principal and interest but shall not exceed Rs 40,000 per annum. The deduction is available for eight assessment years commencing from the assessment year relevant to the previous year in which the assessee starts repaying the loan or the interest thereon.

From the foregoing it is clear that the person pursuing higher education should have repaid the amount. In the instant case, your daughter is pursuing the higher education while you are repaying the principal and also paying the interest. You, therefore, cannot enjoy the deduction under Section 80E.

Tuition fees (excluding development fees, donations or other payments of similar nature) paid for fulltime education of any two children of an individual qualifies for rebate under Section 88.

This payment of tuition fee should be to a university, college, school or other educational institutions situated within India. The amount that will qualify for rebate should not exceed Rs 12,000 per child.

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