Section 80E of the Income-tax Act: Education Loan Interest Deduction

Section 80E is a deduction for the interest on a loan taken for higher education. It covers the interest only, and the principal repaid earns no deduction.
 

• Limit: none, so the full interest paid in a year qualifies
• Period: 8 consecutive years from the year you start repaying, or until the interest ends
• Who: an individual who borrowed for self, spouse, children or a ward under legal guardianship
• Lender: a bank, financial institution or approved charitable institution
• Regime: old regime, so compare it with the new regime

• Number from 1 April 2026: Section 129 of the Income Tax Act, 2025

  
  

Ask your lender for the annual interest certificate before you file. Bajaj Finance counts the monthly instalment of an education loan as an existing obligation, so the loan affects the home loan amount that you can borrow.

Section 80E is a deduction from taxable income for the interest that you pay on a loan for higher education. A deduction lowers the income on which tax is calculated, and the saving equals the deduction multiplied by your tax rate.

The deduction works on the interest part of each repayment. Your lender splits every instalment into interest and principal, and only the interest counts.

The Income Tax Act, 1961 contains this deduction. Section 129 of the Income Tax Act, 2025 replaces it from 1 April 2026, with the same rules. Returns for financial year (FY) 2025-26 still cite Section 80E.

Only an individual can claim Section 80E, for a loan taken for the higher education of 4 kinds of student: yourself, your spouse, your children, or a ward for whom you are the legal guardian. A Hindu Undivided Family (HUF) cannot claim it.
 

An approved charitable institution is one approved under Section 10(23C) or registered under Section 12A, 12AA or 12AB. Higher education means any course of study after the senior secondary examination, including vocational courses.

You can deduct the full interest paid in the year, because the section sets no upper limit. Principal repayments earn nothing.

Formula used: Tax saved = interest paid × marginal tax rate × 1.04 for cess.

At the 30% slab, Rs. 2,00,000 of interest saves Rs. 62,400. The saving is 31.2% of the interest, so every Rs. 100 of interest still costs Rs. 68.80 after tax.

A higher rate or a longer tenure raises the interest and the deduction together. The loan still costs more than it saves, so do not borrow more for the tax benefit.

The deduction lasts 8 consecutive years, starting in the year you begin paying interest, or until the interest is fully paid, whichever comes first. Interest paid after the eighth year earns no deduction.

If you finish the loan in 5 years, you claim for 5 years only. The clock starts when repayment starts, so a moratorium during the course does not use up any of the 8 years.

Longer tenure means a smaller instalment and higher total interest. It also pushes interest into years 9 and beyond, where the deduction gives nothing.

The new regime disallows most Chapter VI-A deductions, and this deduction is not one of the few that the regime keeps. Check the deductions that the return form allows for your regime.

Compare your total tax in both regimes before you choose, as the example below shows. A deduction on its own rarely justifies the old regime.

Education loan interest has no limit, while the two deductions that people claim beside it have fixed limits. All three need the old regime.
 

You can claim all three in the same year, because each has its own limit.

Ask your lender for the interest certificate, and enter the interest under deductions in your return. The certificate splits your yearly payments into interest and principal, and only the interest goes in.
 

Note the year your repayment began, because the 8-year window runs from it.

Aditya Joshi, 32, lives in Nagpur and earns Rs. 2.3 lakh a month, with a CIBIL Score of 768. He borrowed Rs. 25 lakh at 9.5% p.a. for 10 years (120 months) for his master's degree. His equated monthly instalment (EMI) is Rs. 32,349, and repayment starts at the beginning of FY 2025-26. He also claims Rs. 1.5 lakh under Section 80C.

Formula used: EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), where P is the loan, r is the monthly rate (9.5% ÷ 12) and n is 120 months.

The regime test for year 1 decides whether he should claim at all.
 

Section 80E saves Aditya Rs. 71,998 in year 1, yet the new regime costs Rs. 1,30,802 less in total. He files in the new regime. In year 8, with interest of Rs. 82,871 and the same income, the old regime costs Rs. 5,77,864, so the gap grows to Rs. 1,76,944.

Yes. Bajaj Finance assesses income, existing obligations and credit record, and the monthly instalment of an education loan counts as an existing obligation. In the example above, the instalment is Rs. 32,349 a month at 9.5% p.a. for 10 years. The deduction lowers your tax and does not change your eligibility.

The education loan interest deduction and the home loan interest deduction under Section 24(b) both need the old regime, so weigh them together.

Approval timelines can extend where income or loan records need clarification, and minimum income thresholds can differ by city. Check your home loan eligibility with your education loan instalment included.