Tax Benefits | Education Loans for Australia

The interest you pay on your student loan can be deducted under Section 80E of the Income Tax Act of 1961. This benefit is only available to individual borrowers and is exclusively for higher education. The rebate is valid for all academic disciplines, both locally and internationally. It consists of both vocational and academic education. You may, however, take advantage of this benefit an infinite number of times.

You'll need paperwork from your bank or financial institution that splits the principal and interest components of your EMIs to qualify for this benefit and divides the principal and interest components of your EMIs.

This benefit lasts for eight years or until your loan's interest component is paid off, whichever comes first.

However, you must get an education loan from one of India's scheduled banks or one of the two Gazette Notified Financial Institutions listed below to qualify for income tax benefits under Section 80E, as stated by the Income Tax Act of India, 1961.

1 Factors to Consider When Considering Section 80E Tax Deductions

The income tax benefit is only applicable to the interest component of the loan. A tax benefit is not available for the principal component.

The whole interest component of the returned loans can be deducted from your taxable income.

There is no maximum interest that may be imposed on a loan for higher education.

The tax benefit is available to those who have taken out an education loan to pay for higher education for themselves, their spouse, children, or a student for whom they are the legal guardian.

Student loans are taken out for siblings, or other relatives are not eligible for the Section 80E deduction.

A tax deduction may be claimed only if the loan was taken out in the borrower's name.

2 Section - 80E, Income-tax Act, 1961-2014

Deduction in respect of interest on loans taken for higher education

80E 1. In computing the total income of an assessee, being an individual, there shall be deducted, by and subject to the provisions of this section, any amount paid by him in the previous year, out of his income chargeable to tax, by way of interest on loan taken by him from any financial institution or any approved charitable institution for the purpose of pursuing his higher education 97[or for the purpose of higher education of his relative].

2. The deduction specified in sub-section (1) shall be allowed in computing the total income in respect of the initial assessment year and seven assessment years immediately succeeding the initial assessment year or until the interest referred to in sub-section (1) is paid by the assessee in full, whichever is earlier.

3. For the purposes of this section, below is Section - 80E, Income-tax Act, 1961-2014

"approved charitable institution" means an institution specified in, or, as the case may be, an institution established for charitable purposes and98[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;
"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 Gazette99, specify in this behalf;
1["higher education" 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 authorized by the Central Government or State Government or local authority to do so;]
"initial assessment year" means the assessment year relevant to the previous year, in which the assessee starts paying the interest on the loan;]

2["relative", in relation to an individual, means the spouse and children of that individual or the student for whom the individual is the legal guardian.]