Your Taxes

My son availed an education loan during the year for pursuing his MBA degree. I was co-applicant for the loan. Neither the principal nor the interest need be paid during the first 30 months as per the terms of sanction. Section 80E says that the eligible amount of deduction is the actual amount paid towards repayment of interest on a loan beginning with the year in which the person starts repaying the interest. Hence, I understand that I will not be able to claim a deduction under 80E, since there is no repayment. But if I opt to repay the interest charged in the account during the current year (even though there is no demand from the bank), can I claim a deduction under 80E?

Arunachalam R

As per Section 80E, a deduction is available to an individual for interest paid on the loan taken by him from any financial institution or any approved charitable institution for the purpose of pursuing his own higher education or higher education of his relative. The deduction is available only if interest is actually paid during the previous year out of income chargeable to tax. There is no cap on the amount that can be claimed as deduction. No benefit is available on repayment of the principal amount taken under the loan.

The deduction is available for a maximum of eight years (beginning from the initial year in which interest is first paid) or till the interest is paid, whichever is earlier.

In your case, if no interest is paid during the previous year, you shall not be able to claim the deduction in your tax return. However, if you pay any interest on the same without any demand from the bank, you can still claim the deduction under Section 80E as the deduction is available on interest actually paid during the previous year.

My father met with an accident and underwent knee surgery in a private hospital. It cost around ₹3.5 lakh. I paid ₹2 lakh through insurance and the remaining ₹1.5 lakh in Cash. Can a deduction of this ₹1.5 lakh be claimed under Section 80DD or 80DDB? My father is a dependent and also a senior citizen.

Vasanthan

As per the provisions of Section 80DDB, where a resident assessee has paid any amount for the medical treatment of a specified disease or ailment during the previous year for himself or a dependant, he shall be allowed a deduction of the amount actually paid or ₹40,000, whichever is less, during the year in which such amount was actually paid.

As per Section 80DD, where a resident assessee has incurred any expenditure for the medical treatment (including nursing), training and rehabilitation of a dependant, being a person with disability, the assessee shall be allowed specified deduction from his gross total income on the basis of the level of disability. In your case, since your father is not a person with disability as prescribed for Section 80DD and the fact that knee surgery is not a specified disease or aliment as prescribed for Section 80DDB, you cannot claim a deduction on the cost incurred by you for the knee surgery.

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