Month: April 2026

Section 80E of Income Tax Act: Deduction for Interest on Education Loan

Posted on by CA Meet Dhrangadhariya

Last updated: 15 September 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP

Quick summary

  • Section 80E allows a deduction for the full interest paid on a higher education loan, with no upper limit.
  • It is available only to individuals, for 8 years from the year interest payment starts (or until the loan is repaid, if sooner), and only in the old tax regime.
  • The loan must be from a bank, notified financial institution or approved charitable institution, for yourself, your spouse, children or a student you are legal guardian of.
  • Only interest counts, not the principal. From Tax Year 2026-27 the provision is section 129 of the Income-tax Act, 2025.

Section 80E allows an individual to deduct the interest paid on an education loan taken for higher studies, whether for self or for close family. There is no maximum amount, but the deduction runs for a limited period and is available only under the old tax regime.

What is section 80E?

Section 80E is a deduction from total income for the interest part of the EMIs you pay on a loan taken for higher education. The principal repaid is not deductible under this section.

From Tax Year 2026-27 the same deduction is found in section 129 of the Income-tax Act, 2025. For FY 2025-26 (assessment year 2026-27) it is still section 80E of the 1961 Act.

Eligibility for the 80E deduction

  • Only individuals can claim it. HUFs, firms and companies cannot.
  • The loan must be taken for higher education of yourself, your spouse, your children, or a student for whom you are the legal guardian.
  • The loan must be taken from a bank or other financial institution, or from an approved charitable institution. A loan from friends or relatives does not qualify.
  • You must be the borrower, and the interest must actually have been paid out of your income.
  • It is available only under the old tax regime.

Which courses count as higher education?

Any course after passing the senior secondary examination (Class 12) or its equivalent, regular or vocational, in India or abroad.

How much can you claim?

The whole interest paid in the year. For example, if your income after other deductions is ₹6,70,000 and you paid ₹2,00,000 as interest on the education loan, your taxable income becomes ₹4,70,000.

For how many years?

The deduction starts in the year you begin paying interest and continues for 8 years in total, or until the interest is fully repaid, whichever is earlier. If you repay the loan in five years, you can claim for those five years only. If repayment runs beyond eight years, there is no deduction for the later years.

Documents needed

Get an interest certificate from the lender each year. It should show the interest and principal parts of the EMIs paid in that financial year separately. Keep it for your records, and give it to your employer if you want TDS adjusted.

Should you repay early?

Interest saved by repaying early is usually larger than the tax saved by claiming 80E. A deduction reduces your tax only by your slab rate (for example 30% plus cess), while the interest costs you 100%. So the tax benefit alone is not a reason to delay repayment. Consider the loan interest rate, your other investments and your cash needs, and prepay if the interest rate is higher than what you can safely earn elsewhere.

Old regime or new regime?

The new tax regime does not allow section 80E. If education loan interest is large, compare your tax under both regimes before you choose.

Frequently asked questions

Is there a limit on the section 80E deduction?

No. The whole interest paid in the year is deductible. Only the interest counts, not the principal.

For how many years can I claim section 80E?

For up to 8 years starting from the year in which you begin paying the interest, or until the interest is fully paid, whichever is earlier.

Who can claim section 80E?

Only individuals, for a loan taken for higher education of self, spouse, children or a student for whom they are the legal guardian. HUFs and companies cannot.

Does a loan from a relative or friend qualify?

No. The loan must be from a bank, a notified financial institution or an approved charitable institution.

Is section 80E available in the new tax regime?

No. It is allowed only in the old tax regime.

Official sources

Related reading

Disclaimer

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.

Superannuation Fund: How It Works and Tax Treatment (Tax Year 2026-27)

Posted on by CA Meet Dhrangadhariya

Last updated: 01 October 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP

Quick summary

  • A superannuation fund is a trust set up by an employer to pay annuities or pensions to employees on retirement, incapacity or death; only an approved fund gets the tax benefits.
  • The employer’s contribution to an approved fund, together with the employer’s PF and NPS contributions, is tax free up to ₹7.5 lakh a year; anything above it is a taxable perquisite (section 17(1)(h)).
  • An employee’s own contribution is a section 123 deduction within the ₹1.5 lakh limit, in the old regime only.
  • Payments on death, and in commutation of an annuity on retirement or incapacity, are exempt (Schedule II, serial 8). A lump sum on leaving the job is taxed, with tax deducted at the average rate of the last three years.

A superannuation fund is a company pension arrangement. The employer sets up a trust, puts money into it each year, and the fund pays an annuity or pension to the employee after retirement. It is part of the cost to company (CTC) for many employees, so it matters to know what is taxed and what is not.

What the law requires of the fund

The Income-tax Act, 2025 gives benefits only to an approved superannuation fund. Under Schedule XI, Part B, the approving authority (a Commissioner) approves a fund that meets these conditions:

  • it is established under an irrevocable trust in connection with a trade or undertaking carried on in India, with at least 90% of the employees employed in India;
  • its sole purpose is to provide annuities for employees on retirement at or after a specified age, on incapacity before retirement, or for the widows, children or dependants on death;
  • the employer contributes to the fund; and
  • all annuities, pensions and other benefits are payable only in India.

The trustees apply to the Assessing Officer in Form 188 (Rule 313 of the Income-tax Rules, 2026). The income of an approved superannuation fund is itself exempt (Schedule VII, serial 23).

Types of plans

  • Defined benefit: the benefit is fixed by a formula (service, salary, age) and the employer carries the investment risk.
  • Defined contribution: the contribution is fixed and the benefit depends on what the fund earns, so the employee carries the investment risk.

At retirement the fund buys an annuity from an insurer. Common options are an annuity for life, for life with a guaranteed period of 5, 10 or 15 years, for life with return of the purchase price, or jointly for husband and wife.

Tax on the employer’s contribution

The employer’s contribution to an approved fund is not taxed in the employee’s hands, up to a combined limit. Under section 17(1)(h) the total of the employer’s contributions in a tax year to:

  1. a recognised provident fund,
  2. the pension scheme referred to in section 124(1) (the notified scheme, NPS), and
  3. an approved superannuation fund

is a perquisite only to the extent it is more than ₹7,50,000. The yearly interest, dividend or similar accretion on that excess is also a perquisite (section 17(1)(i), worked out under Rule 16).

Example: the employer pays ₹4,00,000 into the provident fund, ₹2,50,000 into NPS and ₹2,00,000 into the superannuation fund in the year. The total is ₹8,50,000. ₹1,00,000 is taxable as a perquisite.

If the employer instead pays a life insurance premium or buys an annuity for you, it is taxable as a perquisite, except where it goes to an approved superannuation fund, a recognised provident fund or the deposit-linked insurance fund (section 17(1)(g)).

Tax on the employee’s contribution

The employee’s own contribution to an approved superannuation fund is one of the items that qualify under section 123 (paragraph 1(g) of Schedule XV). With the other qualifying items such as provident fund and life insurance it must stay within ₹1,50,000. Section 202(2) bars Chapter VIII deductions in the new regime, so this deduction is available only in the old regime.

Tax on the money paid out

Payment Treatment
Paid on the death of a member Exempt
Lump sum in lieu of or in commutation of an annuity on retirement at or after the specified age, or on incapacity before retirement Exempt
Refund of contributions on the death of a member Exempt
Refund of contributions to an employee leaving service otherwise than by retirement or incapacity Exempt only up to contributions made before the Act’s commencement and interest on them, so in practice taxable
Transfer to the employee’s account in the notified pension scheme (NPS) Exempt
Annuity or pension received later Taxable as salary (section 16(b))
Employer’s contribution and interest paid to the employee on leaving service Taxable as profits in lieu of salary (section 18(1)(c)(ii)), with tax deducted by the trustees at the average rate of the previous three years (Schedule XI, Part B, paragraph 7)

The exempt payments are listed at serial 8 of Schedule II.

The trustees must report to the tax department each such payment made during an employee’s lifetime, within two months of the end of the financial year, giving the contribution repaid and the tax deducted.

What the employer gets

The employer’s contribution to an approved superannuation fund is deductible as an expense of business (section 29(1)(a)), subject to the limits the rules set for approval. The employer also reports its payments to the fund in the salary statement (Schedule XI, Part B, paragraph 8).

Superannuation or retirement

They are not the same thing. Retirement is leaving work at a certain age. Superannuation is a fund that helps pay for life after that.

Before you rely on this

  • Whether a payout is “in commutation of an annuity” depends on the fund rules and the insurer’s documents. Ask for a written note of how the payment is described.
  • The refund of contributions on leaving service (serial 8(d)) is exempt only up to contributions made before the Act’s commencement, so check how your fund’s payout is split between your own and the employer’s money.

Frequently asked questions

What is a superannuation fund?

A trust set up by an employer, usually with an insurer, to provide annuities or pensions to employees on retirement at a specified age, on incapacity before retirement, and to dependants on death. The employer must contribute to it.

Is the employer’s contribution taxable for the employee?

Not up to ₹7.5 lakh in a tax year. That limit covers the employer’s contributions to a recognised provident fund, the notified pension scheme (NPS) and the approved superannuation fund together. The excess, and the yearly interest or dividend on it, is a taxable perquisite.

Can I claim the employee’s contribution as a deduction?

Yes, under section 123 (Schedule XV, paragraph 1(g)) within the overall limit of ₹1,50,000 with the other qualifying items, but only in the old tax regime.

Is the pension from a superannuation fund taxable?

An annuity or pension is salary (section 16(b)) and is taxed when received. The lump sum paid in commutation of an annuity on retirement at or after the specified age, or on incapacity, is exempt.

What if I leave the job and withdraw the money?

The employer’s contribution and interest paid to you during your lifetime on leaving service is taxable, and the trustees deduct tax at the average rate you paid over the previous three years (or your period in the fund if shorter). Your own contribution is not taxed again.

Is a fund approved automatically?

No. The trustees apply to the Assessing Officer in Form 188 and the approving authority (a Commissioner) grants approval if the fund satisfies the conditions in Schedule XI, Part B of the Act. Only an approved fund gets the benefits described here.

Official sources

Related reading

Disclaimer

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.