Is education loan interest tax deductible?
By Vijay Singh Sinhmar · Fintech automation specialist, 8 years in finance · Published 2026-10-11
Yes, in the old regime. Section 80E lets you deduct all the interest you pay on a loan for higher education, with no upper limit, for the year repayment starts and the seven years after it. In FY 2026-27, ₹1,00,000 of interest on a ₹15,00,000 salary lowers old-regime tax from ₹2,57,400 to ₹2,26,200. The new regime allows no deduction.
Educational information, not investment advice · Muktify is not SEBI-registered
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Who can claim it
The loan has to be for higher education, for yourself, your spouse, your children, or a student for whom you are the legal guardian, and it has to come from a bank or an approved financial or charitable institution. A loan from a relative or an employer does not qualify.
Only the person who took the loan and is repaying it can claim. Only the interest is deductible; the principal part of each EMI is not.
How long it lasts
The deduction runs for eight years at most: the year you start repaying and the seven years after it, or until the interest is paid off, whichever comes first. Many education loans have a moratorium while the course runs, and the eight years only begin when repayment does.
What it saves
Because there is no cap, the saving is the interest multiplied by your old-regime slab rate plus cess. The examples assume no other deductions.
Remember that the same salary may pay less in the new regime even without this deduction. On ₹10,00,000 the new regime charges nil in FY 2026-27, while the old regime with ₹60,000 of education loan interest still charges ₹94,120. Compare both regimes on all your figures.
| Salary | Interest paid | Tax without | Tax with | Saved | New regime |
|---|---|---|---|---|---|
| ₹10,00,000 | ₹60,000 | ₹1,06,600 | ₹94,120 | ₹12,480 | ₹0 |
| ₹15,00,000 | ₹1,00,000 | ₹2,57,400 | ₹2,26,200 | ₹31,200 | ₹97,500 |
| ₹25,00,000 | ₹2,00,000 | ₹5,69,400 | ₹5,07,000 | ₹62,400 | ₹3,19,800 |
Frequently asked questions
Is there a limit on the education loan interest deduction?
No. The whole interest paid in the year is deductible under Section 80E in the old regime, however large it is, for up to eight years.
Can I claim education loan interest in the new regime?
No. The new regime does not allow the Section 80E deduction, so the interest makes no difference to the tax there.
Can parents claim the deduction for a child’s education loan?
Yes, if the parent took the loan for the child’s higher education and is the one repaying it. The deduction goes to whoever borrowed and pays.
Is the principal repayment of an education loan deductible?
No. Only the interest part of the EMI is deductible. The principal repayment gets no deduction under Section 80E.
Related
- Old vs new tax regime — which is better for me? →
- How much income tax on a ₹15 lakh salary? →
- Tax regime calculator →
Last updated 2026-10-11. Figures reflect FY 2026-27 and are educational estimates, not advice. Muktify is not SEBI-registered and never recommends or ranks any instrument.
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