Loan repayment is a common concern among a lot of students who borrow education loans to fund their higher studies. We all know that repaying an education loan is no cheap affair. Section 80 E of the Income-Tax Act of 1961, which has a provision for an education loan income tax exemption, is a saving grace to students who want to repay their abroad education loan without any additional financial burden.  An applicant can declare the interest paid towards their education loan under this section and this amount will be exempted from their yearly income-tax deductions.

This article will give you information on how you can save a significant amount of money by declaring a certain percentage of your education loan interest as non-deductible under Section 80 E.

Or better yet, let our expert, Damini Mahajan tell you all about how you can avail this education loan income-tax exemption in the 15th episode of Loanflix below.

What is Section 80 E?

Section 80 E of the Income Tax Act of 1961 states that a certain percentage of the interest paid towards your education loan can be declared by the loan applicant or the co-applicant as non-deductible. Let us consider an example to understand this definition better.

A student applies for an education loan of Rs.30 Lakhs to fund their higher studies. The course duration is 2 years. The student’s father is the co-applicant here. His annual income is Rs.10 Lakhs. According to the tax deduction bracket set by the income-tax department of the Govt.of India, the father falls under the 30% income-tax deduction bracket which means that the co-applicant has to pay 30% of his salary (Rs.3 Lakhs) as income tax, every year.

Since his child is an education loan applicant, he can claim exemption of a certain percentage of the interest paid towards his child’s education loan under Section 80 E of the Income Tax Act of 1961.  Now, let's calculate how Section 80E works.

As mentioned earlier, after the course duration of 2 years and a moratorium period of 6 months, the co-applicant is expected to start repaying the loan amount. As the father is the co-applicant in this case, he is expected to start repaying this loan amount after the repayment holiday ends.

According to Section 80E, the education loan applicant or the co-applicant may avail of the education loan income tax exemption. In this case, the father is eligible for an exemption. A co-applicant can use this provision to avail tax exemptions only for a period of 8 years after the course is over.  Let's assume that the student plans to repay the entire loan amount within this time. In this case, the interest accumulated over 8 years amounts to Rs. 25 Lakhs. This means that on average, the student has to pay annual interest of Rs.3.1 Lakhs. Now, under section 80E, the co-applicant here will be able to save 30% of that interest amount. So, he will end up saving close to Rs. 8 lakhs over the loan tenure.

Key features of claiming an education loan income-tax exemption under Section 80 E

There are certain key features that you may have already noted in the above example. To make it simple, we list down the notable ones:

  1. An education loan income tax exemption can be claimed either by the loan applicant or the co-applicant. So, even if the student returns to India during their loan repayment period, either they or their co-applicant can claim this education loan income-tax exemption. In any case, only one of the two can claim this exemption.
  2. The maximum time duration for which you can claim this exemption is 8 years. Hence, it is advised that you don’t opt for a loan repayment tenure that goes beyond this time.
  3. The financial team of WeMakeScholars always recommends their students to start the loan repayment only after the moratorium period ends, for this reason alone. Most loan applicants make smaller payments towards their education loan during their course period. Hence, they won't be able to save much even if they avail the income-tax exemption in the course duration. This is another reason why students are recommended to start their interest payments after the moratorium period.
  4. Also, as mentioned above, this exemption can be availed for only up to 8 years after the course ends. Since a co-applicant will not be able to save much during the course, he/she ends up losing a good 2 years' time out of the 8 years.
  5. This income-tax exemption is only applicable on the interest for an education loan borrowed to fund only higher studies. i.e. any full-time graduate or post-graduate program in any subject area.
  6. Also, it is only applicable for those applicants who have borrowed an education loan from any financial institution and charitable institutions approved by the RBI.

Exactly how much money do you save under this education loan income tax exemption?

The above example may have given you a glimpse of how this education loan income tax exemption helps education loan applicants. However, as a loan applicant, it is essential that you understand the exact amount that can be exempted from the yearly income-tax deductions. Here's a small instance which will make this concept crystal clear to you. The following table shows the 2018-2019 tax slabs set for different income groups by the Income-tax department. This table will help you understand the below example, better.

Annual Income

 Tax to be paid

Up to Rs.2,50,000


Rs.2,50,001 to Rs.5,00,000

5% of the annual income

Rs.5,00,001 to Rs.10,00,000

Rs.12,500 + 20% of the annual income exceeding Rs.5,00,000

Above Rs. 10,00,001

Rs.1,12,000 + 30% of total income exceeding Rs. 10,00,000

Assume this:

  • You have taken an education loan of Rs.10 Lakhs on a 10% interest rate. In this case, your annual interest amount comes to Rs.1 Lakh. Now, if your co-applicant comes under the 10% income-tax bracket according to the table above, then, depending on who repays the loan amount, you or your co-applicant become eligible for a 10% exemption on the total interest amount under Section 80 E of the Income Tax Act. So, according to this clause, you end up saving 10% of your interest amount every year. In this case, it means that after availing the education loan income tax exemption, you or your co-applicant gets to pay Rs. 90,000 instead of Rs.1 Lakh as interest every year.
  • When an applicant avails the education loan income tax exemption, they indirectly save on their annual interest amount. This will automatically bring down the bank's interest rate. In other words, it means that when you claim the exemption, you are paying only 9% of your interest rather than the complete 10%.

Another major point to be noted is that the percentage of income tax exemption applicable to your education loan interest is dependent on the percentage of income tax annually paid by the co-applicant.

  • In this situation, if your co-applicant pays 20% of his annual salary as income-tax then after availing an exemption under Section 80 E, you or your co-applicant become eligible to avail an exemption of 20% of your total interest amount.
  • This will automatically bring the interest rate down to 8% from the 10% set by the bank. The same applies to loan applicants belonging to different tax-payment brackets set by the Income-Tax Department.
  • The provision under Section 80E is only applicable to Indian citizens who have borrowed an education loan from Indian banks only.
  • This means that a candidate is not eligible to claim this income tax exemption when they borrow from foreign-based lenders.  

If you still have doubts about how much you get to save when you claim this education loan income tax exemption, you may get in touch with the financial team at WeMakeScholars. When you do so, do mention the total loan amount you plan to borrow, the interest rate and the loan tenure. Let’s take a look at the most relevant part of the article. 

What is the procedure to claim the Education loan income tax exemption?

  • Declaring that you have made interest payments towards the education loan when you file your annual TDS is the only step to claim this education loan income tax exemption under Section 80 E.
  • As a co-applicant, you may provide receipts of your EMI payments as proof while declaring your TDS.
  • If the co-applicant is a salaried employee, this proof of payment has to be provided before filing the TDS.

Although Section 80 E aims at helping education loan applicants save money on their repayment amount, there are certain conditions under which, they may not benefit much from this provision. Here is how.

Situations in Which Availing Section 80 E May Not Benefit You

Scenario 1: If the loan applicant is employed abroad after the course completion and the co-applicant doesn't qualify

When you work in a country other than India, you are not eligible to file an income tax claim under Section 80 E. Also, if your co-applicants' monthly salary is less than Rs.5 Lakh, or if they only earn a substantial amount, then, according to the percentage of education loan income tax exemption as mentioned in the above table, they may not be able to save much under this provision.

Scenario 2: If your co-applicant has retired or is going to retire

If your co-applicant has already retired with a pension or is nearing their retirement, it is obvious that the monthly pension of your co-applicant will not match up to the salary drawn when they were employed. Generally, after retirement, their taxable income will reduce due to senior citizen quota.

Scenario 3: Both, the student and the co-applicant are not in India

If both you and your co-applicant are not present in India as they belong to the NRI community (Non-Resident Indian), and the loan applicant is not planning to be in India during the loan repayment years. In such a case, both you and your co-applicant are not eligible for an education loan exemption under Section 80 E.

The following conclusions may be drawn from the above scenarios:

  • If your co-applicants’ annual income is less than Rs. 5,00,000, declaring your interest under Section 80 E may not benefit you much.
  • If you do not earn in India during your loan repayment period, you become ineligible to claim an exemption under this provision. The same applies to your co-applicant if they belong to the NRI community.


Education loan repayment is the biggest financial liability a student can have. However, the Govt. of India, along with the MHRD, has provided a big relief to students who can actually benefit from an education loan income tax exemption, in the form of Section 80 E. Although a lot of information about Section 80 E is made available to students and guardians alike on the internet, many are still unaware of the process for availing this exemption. If one directly approaches their respective banks, asking about the subsidy schemes introduced by the Government of India, it is more likely that they would be too preoccupied to pay attention to your queries. This is the major reason why the founders of WeMakeScholars started Loanflix- a comprehensive web-series on education loans and more. We assure you that the information provided in each episode of Loanflix will not be found anywhere else on the internet. So do make it a point to watch the 15th episode of this very informative web-series, 'Education loan income tax exemption: Section 80 E'.

Note: WeMakeScholars is an organization funded and supported by the Government of India that focuses on International Education finance. We are associated with 10+ public/Pvt banks/ NBFCs in India and help you get the best abroad education loan matching your profile. As this initiative is under the Digital India campaign, it’s at free of cost. The organization has vast experience dealing with students going to various abroad education destinations like the US, Canada, UK, Australia, Germany, Sweden, Italy, China, France among others