Spend, Save and Invest Smartly
My Son is soon going to be in college. The fees these days for those Engineering and MBA courses are ridiculously high. I plan to take an educational loan for my Son’s higher education. Thank God for those tax deductions available under Section 80 E of the income tax act. Learn To make Lemonade out of Lemons. Whenever you are in a catch 22 situation always study your options and make the best possible decision. I would like to remind all of you that the team of Financial Planners at Moneymindz.com are always there for you to plan your Tax Planning needs in a most effective and efficient manner. You can explore this unique Free Advisory Service just by giving a missed call on 022 6211 6588.
Here you can claim income tax deductions as per Section 80 E of the Income Tax Act on the interest component of the EMI taken for an educational loan. Here only an individual who takes a loan for the higher education of himself, spouse, children, or if he is the legal guardian of the individual who takes the educational loan he can claim deduction benefits under the Section 80 E. This is not applicable for Hindu Undivided families.
Here when you avail of that education loan the bank issues a statement, stating what is the component of the Principal and what is the component of the interest in the EMI, and what is the amount necessary to be paid towards Principal repayment and what is the amount necessary to be paid towards interest repayments. There is no maximum limit for claiming this deduction under Section 80 E. Here the entire interest amount can be deducted from the taxable income.
Here the interest component of the loan paid back is tax deductible under Section 80 E only if the loan is availed from a financial or a charitable institution .suitably established for this purpose. The interest component of loans taken from relatives or friends is not eligible for deductions under the Section 80 E of the income tax act.
No, Parents can claim the deductions under Section 80 E of the interest component of the educational loans of their children but children cannot do the same.
Here logically we note that the Principal part of the EMI is payable only once the educational course is complete. Banks have an option where the interest component of the EMI is payable immediately after the loan is disbursed. But should we avail of such an offer? Here if we start paying off the interest component of the EMI before we start earning, we might not have any taxable income to claim deductions under Section 80 E. Thus it is always better to go for the repayment of the interest component of the EMI after we start working and not before completion of our education.