u/s 80E of The Income Tax Act 1961

Only interest paid on an educational loan is allowed as deduction u/s. 80E of The Income Tax
Act, 1961, out of his/her income chargeable to tax i.e. Deduction will be allowed only when actual
interest is paid.
Loan should be taken by individual for pursuing higher education of self, spouse or his /her
childrens. Hence parents are also eligible to claim deduction of interest paid by them on
loan taken for their childrens education. (See Note 1)
Loan should be taken from approved financial institution(See Note 2) or from institution
established for charitable purposes and approved by the prescribed authority under clause (23C) of
section 10 or an institution referred to in clause (a) of sub-section (2) of section 80G.
Loan should be for full-time studies for any graduate or postgraduate course in engineering,
medicine, management or for post-graduate course in applied sciences or pure sciences including
mathematics and statistics; [From A.Y. 2010-11 see Note 3]
Deduction is allowed for a continuous period of eight years, starting with initial assessment year in
which the assessee starts paying the interest on the loan or until the interest is paid in full
whichever is earlier.

Notes: -
1) An Individual is also entitled to claim deduction u/s. 80 C of The Income Tax Act, 1961 upto
Rs. 1,00,000 in the year of payment in respect of as tuition fees (excluding any payment towards any
development fees or donation or payment of similar nature), whether at the time of admission or
thereafter,(a) to any university, college, school or other educational institution situated within India;
(b) for the purpose of full-time education of self, spouse or his /her childrens;
2) financial institution means a banking company to which the Banking Regulation Act, 1949 (10
of 1949) applies (including any bank or banking institution referred to in section 51 of that Act); or
any other financial institution which the Central Government may, by notification in the Official
Gazette, specify in this behalf
3) Definition of Higher education is proposed to be substituted by making a amendment as per
Finance (No. 2) Bill 2009. After the amendment Higher education would means any course of study
pursued after passing the Senior Secondary Examination or its equivalent from any school, board or
university recognised by the Central Government or State Government or local authority or by any
other authority authorised by the Central Government or State Government or local authority to do
so.