Tax Benefits on Education Loan for PG in 2026: A Complete Guide for Indian Students

INTRODUCTION

Pursuing a postgraduate degree can be expensive. Tuition fees, living costs, and other expenses often make students and families look for smarter ways to manage money. One powerful tool many students overlook is the tax benefits on education loan for PG under India’s Income Tax Act. These benefits help reduce your taxable income by allowing deductions on a portion of what you pay toward your education loan, which can result in significant savings over time.

This blog will walk you through every aspect of how tax benefits work for education loans in 2026, how to claim them, eligibility rules, real examples, government updates, and practical strategies to make the most of them.

What Are Tax Benefits on Education Loan for PG?

In simple terms, tax benefits on education loan for PG refer to deductions you can claim when filing your income tax return if you’ve taken an education loan for postgraduate studies. The most relevant provision in India is Section 80E of the Income Tax Act, 1961, which provides a deduction on the interest paid on an eligible education loan.

These benefits don’t reduce your loan amount. Instead, they lower your taxable income, reducing the tax you owe for that financial year. That can translate into real savings, especially when you’re repaying a large loan over several years.

How Section 80E Works (The Core of Tax Benefits for Education Loans)

Section 80E allows you to claim a deduction on the interest portion of your education loan paid during a financial year. This means:

• Only the interest part of your EMI (Equated Monthly Instalments) qualifies — not the principal repayment.

• There is no upper limit on the amount of interest you can claim as a deduction. You can claim the full amount of interest you actually paid in that year.

• The deduction can be claimed for up to eight years from the year you start repaying the loan, or until the interest is fully paid — whichever comes first.

• This benefit is available only under the Old Tax Regime. If you file taxes under the New Tax Regime, these deductions are not available.

Example of How It Works in 2026

Let’s say you take an education loan of ₹20 lakh at an interest rate of 10% for a two-year PG course with a moratorium (the period before you start repaying) included. Once repaying begins, imagine you pay ₹1.8 lakh in interest in a financial year.

Under Section 80E, you can reduce your taxable income by ₹1.8 lakh for that year. If you are in the 30% tax bracket, that’s a direct tax saving of around ₹54,000 for the year — and you can do this for up to 8 years as long as you’re paying interest.

Who Can Claim These Tax Benefits?

To benefit from tax benefits on education loan for PG, you must meet these conditions:

✔ Education Loan from Recognised Lender

Your loan must be taken from a recognised bank, financial institution, or approved charitable organisation. Loans from friends or relatives don’t count.

✔ Higher Education Purpose

The loan must be for higher education, including postgraduate studies in India or abroad, vocational programmes and professional courses.

✔ Individual Taxpayer

Only individuals can claim this benefit. Hindu Undivided Families (HUFs), companies, firms, or trusts cannot.

✔ Beneficiary Relationship

The loan can be for your education, your spouse’s, your dependent child’s or another student for whom you are a legal guardian.

✔ Old Tax Regime Opt-In

This deduction no longer applies under the New Tax Regime, so you must file under the Old Tax Regime to claim it.

What Exactly Can You Deduct?

The key thing to know is this:

• Interest on Loan Only: You can not deduct the principal amount repaid during the year — only the interest portion of your EMIs qualifies.

• No Upper Cap: Unlike Section 80C (which has a cap of ₹1.5 lakh), Section 80E has no cap on the interest amount you can claim, so you can deduct whatever interest you paid that year.

• Period of Deduction: You can claim it for up to eight years from the year you begin repayment.

This means if you start repaying the loan in AY 2026-27, you can claim deductions on interest paid that year and continue doing so up to AY 2033-34 or until the loan interest is fully paid.

How to Claim the Tax Deduction

Claiming the tax benefits on your education loan is straightforward, but you need certain documents:

Documents You Will Need

1. Loan Sanction Letter from your bank or financial institution

2. Interest Certificate from the lender showing the interest paid for the financial year

3. Proof of Education Enrollment (admission letter or fee receipts)

4. PAN and other basic tax filing documents

Steps to Claim

1. Choose Old Tax Regime when filing your ITR (Income Tax Return).

2. Enter Section 80E under “Deductions” in your ITR form.

3. Upload/attach details of interest paid (some platforms may ask for the certificate).

4. Review and submit before the filing deadline.

If you miss claiming in the current year, you can also revise your tax return for up to a certain period as per Income Tax rules, provided the statute of limitation hasn’t expired.

Planning Your Finances Around These Tax Benefits

Understanding the rules allows you to make smarter decisions:

Match EMI Timing

Make sure you pay your EMIs before 31 March each year if you want to include them in that year’s tax filing.

Old vs New Tax Regime

Since Section 80E deductions are unavailable under the New Tax Regime, calculate both regimes before filing each year to see which gives you better savings.

Claim Every Year for 8 Years

If your loan repayment schedule stretches over many years, plan so you can claim the maximum eight years of deductions permitted.

Does It Matter If You Study Abroad?

Yes — and this is good news:

Even if your education loan is for studies outside India, you can still claim these tax benefits under Section 80E so long as:

• The loan is from an Indian financial institution or approved lender,

• It’s for higher education (PG or equivalent), and

• You’re filing under the Old Tax Regime.

This makes managing cost of study abroad loans easier for Indian students, now more than ever.

Common Myths and Mistakes to Avoid

Myth: You Can Deduct Principal Amount

Only interest paid qualifies for deduction. The principal part of your EMI is not eligible under Section 80E.

Mistake: Claiming Under the New Tax Regime

If you choose the New Tax Regime, you cannot claim this deduction. Always check which regime benefits you more.

Myth: Loan Must be in Student’s Name

It does not have to be in your name. If you take the loan for your spouse, child or ward, you can claim the deduction as long as you are the one repaying it.

Other Tax Breaks Related to Education

Beyond Section 80E, there are a few other small education-related tax benefits worth knowing, even though they are separate from tax benefits on education loans for PG:

Section 80C

If you pay tuition fees for your children’s education, you can claim a deduction up to ₹1.5 lakh under Section 80C. This is separate from loan interest deduction.

Allowances

If you receive Children’s Education Allowance or Hostel Allowance as part of your salary, exemptions are limited but may help reduce your taxable income slightly.

FAQ

Q. What exactly are tax benefits on education loan for PG students?

A. They refer to deductions you can claim on the interest paid on your education loan under Section 80E, which reduces your taxable income and lowers your tax liability for up to eight years.

Q. Can I claim tax benefits on education loan for PG if the loan is for studying abroad?

A. Yes. As long as the loan is from a recognised financial institution in India and you file under the Old Tax Regime, you can claim these deductions.

Q. Is there a limit to how much I can claim as part of tax benefits on education loan for PG?

A. No. Section 80E has no upper limit on the interest deduction you can claim, which makes it much more valuable than many other tax breaks.

Q. For how long can I claim tax benefits on education loan for PG?

A. You can claim them for a maximum of eight years from the year you start repaying interest, or until the interest portion is fully paid — whichever comes first.

Actionable Tips to Maximise Your Tax Savings

• Pay interest before March 31 each year to ensure it’s included in the same financial year’s tax return.

• Choose the Old Tax Regime if you plan to claim Section 80E.

• Collect interest certificates every year from your lender to support your claim.

• Discuss with a tax professional if you have a complex repayment structure or multiple co-payers.

CTA: Official Resources & Links for 2026

Income Tax Filing & Laws

• Income Tax Department of India – https://www.incometaxindia.gov.in

• Tax Information and Services – https://www.incometaxindia.gov.in/pages/tools/income-tax-calculators.aspx

Education Loan Information

• National Scholarship Portal (NSP) – https://scholarships.gov.in

• Vidya Lakshmi – Education Loan Portal – https://www.vidyalakshmi.co.in

• Reserve Bank of India – Banking & Education Loan Guidelines – https://www.rbi.org.in

Official Tax Return Filing

• Income Tax e-Filing Portal – https://www.incometaxindiaefiling.gov.in