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Is it possible to get tax benefit on education loan for studies abroad?

The loan can be taken for the education of self, spouse, children or the student for whom the individual is the legal guardian.

By Chirag Nangia

Is it possible to get tax benefit on education loan for studies abroad?
– Manik Desai
As per Section 80E, any individual who has taken a loan from any financial institution or approved charitable institution for pursuing higher education, whether in India or abroad, can claim deduction equivalent to the entire amount of interest paid on the borrowed sum for a consecutive period of eight years, beginning from the assessment year in which the individual has started paying the interest on loan or until the assessment year in which the interest is paid by the individual in full, whichever is earlier. The loan can be taken for the education of self, spouse, children or the student for whom the individual is the legal guardian.

My daughter got Rs 80,000 cash prize from our residential society for securing first position in board exam. Will she have to pay any tax on that income?
-Abhishek Seth
As per Section 64(1A), any income arising or accruing to a minor child (below 18 years of age) shall be clubbed in the hands of the parent whose income is higher. However, these provisions are not applicable if the income arises or accrues to the minor child on account of activity involving application of skill, talent or specialised knowledge and experience. However, in your case, the amount received from residential society shall be treated as gift and hence, the amount shall be clubbed and charged to tax under head 'income from other sources', in your hands or your spouse's hands, whose income is more.

If I prepay my entire housing loan before the full tenure, will I get any tax benefit?
-Vishal Dama
Prepayment of home loan does not entail any specific benefits whereas benefit on repayment of home loan is provided. However, these benefits differ based on timing of repayment of loan, i.e., paid before or after the property is acquired. If repayment is made after acquisition/ construction, total amount of principal paid in a financial year can be claimed as a deduction from gross total income under Section 80C before calculating net taxable income. Interest payment can be claimed as deduction under Section 24 , up to Rs 2 lakh for self-occupied property provided construction gets completed within five years from end of financial year when property was purchased/ constructed.

The writer is director, Nangia Andersen Consulting. Send your queries to fepersonalfinance@expressindia.com