Education Loan, Income Tax Laws, residential property, life insurance policy
Education Loan, Income Tax Laws, residential property, life insurance policy

Education Loan Taken From Father Does Not Qualify For Deduction Under Income Tax Laws

No deduction is available on repayment of principal amount on education loan. You can claim deduction on premium paid for your wife's life insurance policy. Calculation of capital gains on residential property depends on period of holding of such property
Q

I have taken a loan of Rs. 15 lakh from my father for doing my masters. I am repaying the loan in instalments along with the interest to my father. Can I avail tax benefit on the repayment?

A

The tax benefit in respect of interest paid on education loan taken for higher education of self, spouse and children is available under Section 80E of the Income-tax Act, 1961.

The benefit can be claimed for education anywhere in the world and not necessarily in India. Do note that there is no benefit for repayment of the principal amount of the education loan.

Also, under income tax laws, in order to be able to claim deduction in respect of the interest paid, the education loan has to be taken either from a financial institution or an approved charitable institution.

The deduction is available for eight consecutive year beginning from the year when you start paying the interest. The deduction is available on payment basis and thus can be claimed in respect of interest paid for more than one year in the year of payment. 

Since you have borrowed the money from your father, the interest being paid by you to your father on the loan taken for your higher studies does not qualify for deduction under Section 80E.

Q

I bought a unit-linked insurance plan (Ulip) in my spouse's name, who is a homemaker.  I have made the payment from my bank account. Can I claim any deduction on the same?  

A

Deduction in respect of life insurance premium paid can be claimed under Section 80C for policy bought in the name of self, spouse and any children, whether financially dependent or not.

The quantum of deduction available is restricted to 10 per cent of the sum assured, and any premium paid in excess of 10 per cent of the sum assured will not qualify for this deduction. 

Q

My sister owns three residential properties. out of which she sold one residential property and invested the profit in another residential property within two months of the date of sale. Is she liable to pay any capital gain? 

A

The answer to your question would depend on the period for which the property sold was held by her. 

In case she held this residential house for two years or more and has already invested the capital gains on such property in another residential property within two months, she does not have to pay any capital gains tax, as she can claim exemption under Section 54 of the Income-tax Act, 1961.

However, if the property was held for less than two years, there is no tax exemption available, and such gains will be treated as short-term capital gains and will be taxed as regular income.

The author is a tax and investment expert

(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.) 

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