Money
Education loan interest: the deduction, and how long it lasts
In short
Interest paid on a loan taken from a financial institution or approved charitable institution for higher education is deductible from taxable income, with no monetary cap, for the year you begin paying interest and the seven years after it, or until the interest is fully repaid, whichever comes first. Only interest qualifies, not principal.
The deduction is one of the few genuine reliefs in the cost of studying abroad, and it is widely misunderstood as applying to the whole EMI.
The rule now sits in section 129 of the Income-tax Act 2025 for tax years from April 2026, and in the old section 80E for earlier years. The substance is the same.
What can be claimed, and by whom
An individual may deduct the interest paid during the year on a loan taken for higher education, for themselves or a relative, where the interest is paid out of income chargeable to tax.
Relative means a spouse and children, or a student for whom the individual is a legal guardian. A parent repaying a child's loan can claim, which is the common case in Indian families.
The loan must be from a banking company or another institution notified by the central government, or from an approved charitable institution. A loan from a relative or an employer does not qualify.
The eight-year window
The deduction runs for the initial tax year, meaning the year in which you start paying interest, and the seven tax years immediately after it, or until the interest is paid in full, whichever happens first.
That makes the start of repayment a decision with tax consequences. A long moratorium can push the start of the window past the years when your income, and therefore the value of the deduction, is highest.
There is no upper limit on the amount of interest deductible. That is unusual in Indian tax reliefs and is worth knowing when comparing a secured loan against liquidating a family asset.
What higher education means here
The definition is broad: any course of study pursued after passing the Senior Secondary Examination or its equivalent from a recognised school, board or university. It is not restricted to particular subjects or to degrees above a certain level.
There is also no restriction to Indian institutions, which is why the relief is relevant to overseas study at all.
Two practical cautions
First, principal repayment is not deductible under this section. Only the interest component is, so your lender's interest certificate rather than the EMI schedule is the document you need.
Second, whether the deduction is available depends on the tax regime you file under, and the rules there have moved repeatedly. Ask a chartered accountant to run both regimes against your own numbers before assuming the relief.
On the remittance side, note that money sent abroad out of an education loan attracts no tax collected at source, which is a separate and often larger cash-flow benefit.
Related questions
Can both a parent and a student claim?
The deduction belongs to the individual who pays the interest out of income chargeable to tax. It cannot be claimed twice for the same payment.
Does the eight years start from when the loan is sanctioned?
No. It starts from the tax year in which you begin paying interest, which with a moratorium can be several years after sanction.
Is there a maximum deduction?
The section sets no monetary cap on the interest that can be deducted. The limit is the eight-year window, not an amount.