I am 27 years married and reside in Sirsi. I work in a reputed firm and want to avail an education loan to fund my sister's higher education (MBA). Will I get tax benefits on this education loan?
You can claim a deduction under Section 80E of the income-tax Act in respect of interest paid on an education loan, subject to other specified conditions, but only where the loan is taken by you to fund your higher education or the higher education of your wife/children or a student for whom you are a legal guardian. There are certain conditions which must be followed to get the tax deductions: 1. The loan should be taken from any Bank / financial institution or any approved charitable institutions. Loans taken from friends or relatives don’t qualify for the deduction. 2. The loan should be taken to pursue higher studies. It does not matter whether such education loan is taken for higher studies in India or outside India. 3. The deduction allowed is the total interest part of the EMI paid during the financial year. There is no limit on the maximum amount that is allowed as deduction. 4. The deduction for the interest on loan starts from the year in which you start repaying the loan. It is available only for 8 years starting from the year in which you start repaying the loan or until the interest is fully repaid whichever is earlier. You will not get tax benefits on the education loan taken for the higher education of your sister.