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I am going to USA for my Masters, May I know interest I will pay.....is that tax-free

I am going to USA for my Masters, May I know interest I will pay on an education loan is that tax-free, Are there tax benefits available for repaying education loans under applicable laws?

1 Answers Reply
  • Sriram Venkatesan
  • 1 month ago

Hello, I am studying in the USA even when I was reached here to study I had no idea about any taxes or any other benefits, There was a guy from south India who told me about that, in many countries, including India and the USA, there are tax benefits available on the interest paid on education loans.


Tax Benefits on Education Loan Interest in India Under Section 80E of the Income Tax Act You can Google it and read about it in detail.


In India, under Section 80E of the Income Tax Act, tax benefits are available for the interest paid on education loans. Here are the details:


Tax Benefits on Education Loan Interest in India (Section 80E):

What is Covered:


  • Interest Paid: Only the interest component of the education loan qualifies for a tax deduction.
  • Principal Amount: There is no deduction for the principal repayment.

Eligibility:


  • The loan must be taken from a recognized financial institution or an approved charitable institution.
  • It must be used for higher education, including postgraduate studies.
  • The education can be pursued in India or abroad (e.g., for your Master's in the USA).
  • The borrower can claim the deduction if the loan is taken for themselves, their spouse, children, or a student for whom they are a legal guardian.

Deduction Limit:

  • No upper limit: There is no maximum cap on the amount of interest that can be claimed as a deduction.

Time Limit:

  • The deduction is available for a maximum of 8 years or until the loan is fully repaid, whichever comes earlier.

Documents Required:

  • Loan sanction letter from the financial institution.
  • A certificate from the lender clearly specifies the breakup of interest and principal paid during the financial year.


How to Claim the Deduction:

Calculate the Interest Paid:

  • Obtain a statement from the lender that shows the amount of interest paid during the financial year.

File it While Filing Your ITR:

  • The deduction can be claimed while filing your Income Tax Return (ITR) under Section 80E.

Example:

If your education loan interest payment is ₹1,50,000 in a year, the entire amount can be deducted from your taxable income, reducing your overall tax liability.


Advantages:

  • Reduces the financial burden of repayment.
  • Makes education loans for studying abroad (like in the USA) more affordable.


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