"Student loan" is trending on Google in India this week, and one question comes up every time: can I save tax on the education loan? You can, on the interest. From tax year 2026-27, which began on 1 April 2026, the deduction that everyone knows as Section 80E sits in Section 129 of the Income-tax Act, 2025. The rule itself has not changed much.
Section 129 at a glance
| Point | Rule |
|---|---|
| Who can claim | An individual who pays the interest. HUFs, firms and companies cannot. |
| Whose education | Yours, your spouse's, your children's, or a student for whom you are the legal guardian |
| Which course | Any course after Class 12 (senior secondary), in India or abroad, at a recognised institution |
| Which lender | A bank, a financial institution notified by the government, or an approved charitable institution |
| What is deductible | Interest only. Principal, processing fees and prepayment charges are not. |
| Upper limit | None. The full interest paid in the year is deductible. |
| For how long | The year you start paying interest and the next 7 years, so 8 years at most |
| Tax regime | Old regime only. The new default regime does not allow it. |
Who cannot claim it
- Loans from family, friends or an employer do not qualify, even with a written agreement.
- A parent who did not take the loan cannot claim interest paid on a loan in the child's name. The person who took the loan and pays the interest claims it. If the loan is joint, each borrower claims the interest they actually pay.
- Siblings are not covered. A loan you take for your brother's or sister's education does not qualify unless you are their legal guardian.
The 8-year clock
The count starts in the year you begin paying interest, not the year the loan was sanctioned. Many students start paying interest only after the course and moratorium end, so the 8 years often begin when the first job starts. Interest paid in the ninth year and after is not deductible, so a long repayment plan loses the benefit in its later years.
How much it saves: an example
Suppose you pay ₹1,20,000 of interest in tax year 2026-27 and you are in the 30% slab under the old regime. The deduction reduces your taxable income by ₹1,20,000, which saves about ₹37,440 including 4% cess. In the new regime the saving is nil, so compare both regimes with the deduction included before you choose one.
Documents to keep
- The interest certificate from the bank for the tax year, showing interest and principal separately
- The loan sanction letter showing the student's name and the course
- Proof of admission to the course, if the loan was for a relative
Salaried employees can give the interest certificate to their employer so that less TDS is cut through the year, if they have chosen the old regime.
What about my return for last year?
For financial year 2025-26, the return is filed under the Income-tax Act, 1961, so you still claim the deduction under Section 80E. Section 129 applies from tax year 2026-27, the return you will file in 2027. If you missed the original deadline for last year, our belated return guide explains the 31 December option, and our Income-tax Act, 2025 note explains the new section numbers.
Frequently asked questions
What is the new section for education loan interest deduction?
From tax year 2026-27, the deduction for interest on an education loan is in Section 129 of the Income-tax Act, 2025. It replaces Section 80E of the Income-tax Act, 1961.
Is there a limit on the education loan interest deduction?
No. The full interest paid during the year is deductible. Only the principal and other charges such as processing fees are not deductible.
Can I claim the education loan deduction in the new tax regime?
No. The education loan interest deduction is available only if you choose the old tax regime.
For how many years can I claim the education loan deduction?
For the year in which you start paying interest and the next 7 years, so 8 years at most, or until the interest is fully paid if that comes earlier.
Can a parent claim the deduction for a child’s education loan?
Yes, if the parent took the loan and pays the interest. If the loan is in the child’s name and the child repays it, only the child can claim the deduction.
How Vitt-Marg helps
We handle income-tax returns, capital gains computation, tax planning, GST and ROC compliance for individuals, businesses and companies across Noida, Ghaziabad and Delhi NCR. Send us your broker statements or documents and we will tell you exactly what you owe and how to file it correctly.
General information, current as of 7 November 2026, not advice for a specific case. Due dates and fees change with MCA and CBDT notifications. Check with us before acting on it.