How higher education actually helped Sonal save on Taxes? ??
Ruhi could not control her excitement. Her favourite cousin Sonal was visiting. As kids, they spent hours on the terrace finding funny shapes in the clouds and looking at the stars.
Sonal had developed this childhood fascination into a serious hobby and now a career choice. She wanted to take a degree in Astrophysics and then hopefully work with ISRO.?? There was some support from a scholarship, but overall, costs were too damn high!
Ruhi heard the entire story and thought of ways she could help. She remembered how Sanchit, their Chartered Accountant, usually had some solution and decided to call him.
After three rings, Sanchit answered, “Hey, how are you doing? How can I help today?”
Ruhi shared the entire story and asked him if there was some way to reduce the costs.
"I can’t help reduce the costs, but may I interest you in some tax benefits? If Sonal decides to take a bank loan for higher education, the interest amount on the loan EMI will be available as a deduction under Section 80E of the Income Tax Act."
Sanchit continued, "This means that the taxable income will be reduced by the amount of interest, leading to fewer taxes to that extent. There is no limit on the amount that can be deducted. Further, this deduction can be claimed for the entire loan period (maximum eight years only). "
Sonal was happy to hear this. But she had a question. Since she wasn’t earning, her mom would apply for a loan. Would her mom also get the benefit, she asked?
“Of course, the loan can be for the higher education of the person taking the loan, their spouse or children. Further, Tuition fees paid to educational institutes in India for full-time education (up to two children) will also be allowed as a deduction Section 80C (xvii) up to Rs. 1,50,000 every year, reducing the tax liability further.”, replied Sanchit.
Sonal beamed with happiness and hugged Ruhi tightly. This was brilliant. With these tax savings to make her journey smoother, she could soon see herself in the astronaut attire.????
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Till next week,
Happy Wealth Creation
Disclaimer: Educational content, not financial/taxation advice. Please consult your financial advisor/tax consultant before deciding based on this content.