Student loans for education are the quickest way to finance your dreams when you want to pursue higher education both domestically and abroad. A student loan not only pays for your education but also offers great tax advantages to the primary or co-borrower.

You are qualified to claim tax deductions for the entire interest component of loan repayment, regardless of whether you are a student or a parent. What you need to know about 2022 tax benefits on student loans is provided below.

Eligibility

According to the rules, only an individual may claim a tax benefit, and joint loans are not eligible for deductions. Having said that, if you are- you may be eligible to claim tax benefits under Section 80E of the Income Tax Act of 1961.

• A parent who co-signs or is the primary borrower on a loan for their children.
• After landing a job, a student who took out the loan can deduct this from his taxable income.
• A loan being paid by a spouse
• A legal guardian who is repaying a loan for a child may be eligible for tax advantages.

The reason for the loan

Only student loans for higher education in India or abroad qualify for a tax deduction under section 80E. Any full-time course you wish to pursue after passing the senior secondary exam or its equivalent from a recognized board is considered to be higher education. Any post-graduate degree that you want to pursue is also included. Additionally, you can benefit from tax breaks for vocational training.

Amount deducted

Keep in mind that when it comes to student loans, the tax advantages only apply to the interest portion of the loan, not the principal. There is no cap on how much money you can save in a given fiscal year; you can deduct all interest that is due. This compensates for the absence of tax advantages associated with principal repayment, making it a viable option.

Period of tax deduction

Tax benefits for student loan debt are only available for a limited time. Simply put, the first year of repayment is the year you begin making EMI payments on your loan. You can only deduct interest from your taxes for a maximum of 8 years, including this first year.

Origin of funds

Not all student loans qualify for tax deductions under section 80E. This means that the tax advantages are only valid if you have borrowed money from a bank, financial institution, or an authorized charitable organization. If you borrow money from friends or family to pay for your higher education, you cannot benefit from tax savings.

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