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CA Intermediate · Taxation · Deductions from Gross Total Income

Karan, a resident individual, opts for the old regime for tax year 2026-27. He took a loan for his daughter's higher education. He started repaying it, and paid the first interest, in tax year 2018-19. During tax year 2026-27 he paid interest of ₹70,000 on this loan. His gross total income is ₹9,00,000. What deduction for education loan interest can he claim for tax year 2026-27?

No deduction is available. Education loan interest is deductible only for eight consecutive tax years starting from the year in which interest payment begins. Karan began in 2018-19, so the period ended with 2025-26. Tax year 2026-27 falls outside it, and the interest paid is not deductible.

  1. A₹70,000
  2. B₹50,000
  3. CNilCorrect
  4. D₹35,000

Explanation

The deduction for interest on an education loan is allowed from the year in which the interest starts being paid, for eight consecutive tax years, or until the interest is fully paid if earlier. There is no monetary cap during this period. Karan's eight years run from 2018-19 to 2025-26. Tax year 2026-27 is the ninth year, so no deduction is available, even though he paid ₹70,000. ₹70,000 is wrong because it ignores the eight-year limit.

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