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CA Intermediate · Taxation · Deductions from Gross Total Income

Neha Kulkarni, a resident individual, pays interest of Rs 1,10,000 during tax year 2026-27 on an education loan taken from a bank for her own higher studies, and has opted for the old tax regime. Her gross total income is Rs 5,00,000. Which statement correctly describes the deduction for this interest?

The full interest of Rs 1,10,000 is deductible. Interest on a higher education loan from a bank or notified institution, for self, spouse or children, has no monetary limit and can be claimed for the first year of repayment and the following seven years, or until the interest is repaid.

  1. AAllowed in full, Rs 1,10,000, for up to eight tax years starting from the year interest payment beginsCorrect
  2. BAllowed only up to Rs 1,00,000 per year
  3. CAllowed only if the loan was taken for a child's education
  4. DAllowed only for the principal repayment, not interest

Explanation

Interest on a loan taken from a bank or notified institution for the individual's own, spouse's or children's higher education is deductible in full with no monetary ceiling. It is available for the year payment begins and the next seven years, or until the interest is fully paid, whichever is earlier. Principal repayment is not deductible, and a cap of Rs 1,00,000 does not exist.

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