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Income-tax Act, 1961 · Chapter VI: A · B.—Deductions in respect of certain payments

Section 80E: Deduction in respect of interest on loan taken for higher education

The Income-tax Act, 1961 was repealed by the Income-tax Act, 2025 from 1 April 2026. The text is kept here because the judgments below apply it.

In plain words

An individual can reduce their taxable income by the amount of interest paid on a loan taken from a bank or approved charitable institution for higher education, either for themselves or for a spouse, children or a student they guard, for the initial assessment year and the next seven assessment years or until the interest is fully paid, whichever is earlier.

  • Interest paid on a loan from a bank or an approved charitable institution qualifies for deduction.
  • The loan must be used for a course of study pursued after the Senior Secondary Examination.
  • Deduction is allowed for the initial assessment year and the next seven assessment years, or until the interest is fully paid, whichever comes first.
  • The deduction applies only to individuals, not to other types of taxpayers.
  • A relative includes the spouse, children or a student for whom the individual is the legal guardian.
  • The charitable institution must be one specified or approved under clause (23C) of section 10 or mentioned in section 80G.
  • The financial institution includes banks covered by the Banking Regulation Act, 1949 or any other institution notified by the Central Government.

Example: A student takes a loan from a bank to pursue a postgraduate course and pays interest during the first year. The interest amount paid can be deducted from the total income for that year and for the subsequent seven assessment years, or until the interest is fully paid, whichever occurs first.

A simplified explanation, prepared with AI assistance from the official text below and checked automatically against it for numbers and cross-references. The official text is the law and prevails over this summary. Not legal advice.

Official text

(1) In computing the total income of an assessee, being an individual, there shall be deducted, in accordance with 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 [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,—

(a) —approved charitable institution‖ means an institution specified in, or, as the case may be, an 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;

(b) —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; [(c) —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 authorised by the Central Government or State Government or local authority to do so;]

(d) —initial assessment year‖ means the assessment year relevant to the previous year, in which the assessee starts paying the interest on the loan;]

[(e) —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.]

Source: India Code (Legislative Department), the text of the Act as it stood before its repeal. Words in square brackets [ ] were inserted or substituted by later amending Acts, and *** marks words omitted by an amendment. The amendment footnotes are not reproduced here. Official text on India Code.

Supreme Court judgments citing the section 80E