It is a fact that education expenses are on the higher side and one may be required to take a loan to get the higher education. Moreover one gets the benefit for claiming income tax rebate on the interest component.
The important point which makes educational loan attractive is that the entire interest you pay on the education loan can be claimed as deduction while calculating your taxable income.
This benefit allowed under Section 80E of the Income Tax Act can translate into tidy savings. For instance, if your taxable income during a year is Rs 10 lakh and the interest you pay on the education loan that year is Rs 1 lakh, then you need to pay tax on Rs 9 lakh. This means Rs 20,600 paid less as tax for the year. You can claim the interest deduction on loans taken to fund studies in India and also abroad. But take note of the restrictions.
Few Points to be considered
- The tax benefit can be claimed for a maximum of eight years – beginning from the year in which you start paying the interest on the loan and for seven consecutive years after that.
- Only the person taking the loan can claim the deduction.
- Applicable for only approved financial courses and if loan taken from authorised financial institutions.
Thus students now need to be bold and have faith in their capability and should go for the educational institutes whose fees is paid by their two years annual income after joining a company post completion of the course. if the cost of the fees is more than your 2 years annual salary post employment than course may not be worth the effort and money being spent.