All you need to know about Tax Benefits on Education Loan Interest Payments


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Pramod

Please answer this query(even it looks silly for you): Which of the following 3 options is best for a 2 year PGP course costing Rs.15 lakhs? 1. Rs.15 Lakhs from pocket (without taking any loan) 2. Rs. 7.5 Lakhs from pocket & Rs. 7.5 Lakhs education loan 3. Rs. 15 Lakhs education loan

22 Nov, 2012 |

+Read Replies (1)

Prince Doshi

Hi Pramod, Apologies for the delay in reply. The answer depends on several factors - your total taxable income, tax slab rate you fall in and your ability and willingness to pay additional interest for two years. Say you pay total interest of Rs 1.5 lacs in the first year and Rs 1 lac in the second year on loan of Rs 15 lacs. You will save maximum tax of Rs 46,350 in first year and Rs 30,900 in the second year (assuming you are in the maximum tax slab rate of 30.9%) ie Rs 77,250. But you will pay interest of Rs 2.5 lacs over and above Rs 15 lacs. This results in additional cash outflow of Rs 172,750. You can save this additional cash outflow by not availing education loan. If the duration of the loan is longer, better it will be from a tax benefit perspective. However, tax benefit will be definitely be available if you avail the education loan. So choose wisely. In my view, option 2 is suggested in your case since you will pay lesser interest plus you will also save tax on your total income. Trust the above suffice your requirements. In case you need any clarifications, do not hesitate to ask. Thanks.

27 Nov, 2012 |


dayanand

hi doshi i want to know how much interest amount is exempt under section 80e i mean maximum amount

25 Feb, 2013 |

+Read Replies (1)

Prince Doshi

There is no limit. The total amount of interest paid will be allowed as deduction - be it Rs 1 or Rs 1000 or Rs 1000000

3 Jun, 2013 |


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11 Apr, 2013 |


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17 Apr, 2013 |