Section 129 — Higher Education Loan Interest | ITA 2025

Section 129 — HIGHER EDUCATION LOAN INTEREST DEDUCTION (1961 s. 80E SUCCESSOR)

Section 129 is the substantive equivalent of 1961 s. 80E. Individual allowed deduction for INTEREST PAID on loan taken from any financial institution / approved charitable institution for higher education of self, spouse, children, or any student for whom the assessee is legal guardian. NO LIMIT on quantum — full interest deductible. Available for 8 SUCCESSIVE TAX YEARS from year of first repayment OR until interest is fully paid, whichever earlier. Available ONLY in OLD regime.

Statutory text — Income-tax Act, 2025

Marginal note — Deduction in respect of interest on loan taken for higher education

(1) An assessee, being an individual, shall be allowed a deduction of amount p aid as interest during a tax year, subject to the provisions of this section, on a loan taken by him from any financial institution or any approved charitable institution, if the—

(a) loan taken is for the purpose of pursuing higher education of himself or his relative; and

(b) payment is made out of his income chargeable to tax.

(2) The deduction referred to in sub-section (1) shall be allowed in computing the total income in respect of the initial tax year and seven tax years immediately suc- ceeding the initial tax year, or until the interest referred to in sub-section (1) is fully paid by the assessee, whichever is earlier.

(3) For the purposes of this section,—

(a) “approved charitable institution” means a registered non-profit organi- sation where it was approved earlier under the provisions of section 10(23C) of the Income-tax Act, 1961 (43 of 1961), or an institution referred to in section 80G(2)(a) of the said Act;

(b) “financial institution” means a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act) or any other financial institution which the Central Government may, by notification, specify;

(c) “higher education” means any course of study pursued after passing the Senior Secondary Examination or its equivalent from a school, board, or University recognised by the Central Government or State Government, local authority, or by any authority authorised by the Central Government or State Government or local authority to do so;

(d) “initial tax year” means the tax year in which the assessee starts paying the interest on the loan;

(e) “relative”, in relation to an individual, means the spouse and children of that individual, or the student for whom the individual is the legal guardian.

Corresponding provision — 1961 regime

INCOME-TAX ACT, 2025	INCOME-TAX ACT, 1961
INCOME-TAX ACT, 2025 — s. 129	INCOME-TAX ACT, 1961 — s. 80E
Interest deduction — no quantum limit	1961 s. 80E(1)
Beneficiary: self / spouse / children / ward	1961 s. 80E(3) Expl.
8-year sliding window from first repayment	1961 s. 80E(2) read with Expl.
Higher education = post-12th studies (any field)	1961 s. 80E Expl. (FA 2009 widening)

PLANNING NOTES

(i) Apply for education loan in NAME OF PARENT (assessee) where parent has higher tax-bracket — better deduction utility. (ii) For multi-year loans (typical: 7-10 year repayment), 8-year deduction window may not cover entire repayment — front-load interest payments where possible. (iii) 'Higher education' broadly construed (post FA 2009): undergraduate / postgraduate / vocational / professional courses post-12th — Indian or FOREIGN universities qualify. (iv) Loan from EMPLOYER does NOT qualify — must be financial institution (bank / NBFC) or notified charity. (v) Document interest-certificate from lender annually.

CROSS-REFERENCES

Sections 130 / 131 — Housing-loan interest deductions.
Section 195 — New regime (s. 129 unavailable).

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