Tax relief valid on edu loans to study abroad
Lubna Kably
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Mumbai:
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In good news for parents whose children study overseas or plan to do so, the Pune income-tax appellate tribunal has held that higher education abroad is no bar for claiming tax relief on educational loans.A deduction for interest paid on such loans will be allowed from the taxable income of a parent, who has taken the loan and is paying interest, even if the child is studying overseas.
However, such a loan must be taken from either financial institutions, banks or from government-approved charitable institutions. Though Section 80E of the I-T Act states a parent is eligible for claiming tax relief on such loans, it has often been a ground for dispute during tax assessment. The term `higher education' has been defined in Section 80E of the I-T Act as: “Any course of study pursued after passing the senior secondary examination (SSE) or its equivalent from any school, board or university recognised by the central government, state government, local authority or any recognised authority .“
“This section does not specify that higher education must be undertaken by the student in India or that the overseas course must be approved by authorities in India. The only requirement is that such higher education should be undertaken by the student after passing SSE or its equivalent from a recognised institution in India,“ says Parizad Sirwalla, tax partner, KPMG.
Even in this case of Nitin Shantilal Muthiyan, which came for hearing before the Pune tribunal, the tax officer had held that deduction under Section 80E is allowable only in cases of higher education pursued in India. He, thus, disallowed the claim of interest of Rs 73,125 made by the taxpayer whose son, who had completed his BE in Electronics from Pune University, was pursuing a course at George Washington University , US. At the first stage of appeal, the commissioner of I-T (appeals) also upheld the action of the tax officer.
The taxpayer then filed an appeal with the income-tax appellate tribunal (ITAT) and obtained a favourable order. The ITAT in its order observed: “Provisions of Section 80E do not contain any stipulation that the higher education should be pursued only in India. If the intent of the legislation was that education should be pursued in India, in order to avail of the interest deduction, it would have stated so. Further, the taxpayer's son had completed SSE or its equivalent, as is required by this section, before pursuing studies overseas.“ Thus, the ITAT allowed the interest deduction claim made by the father during financial year 2008-09.
“The ITAT's decision is welcome, particularly in light of the spiralling cost of overseas education, and more and more Indian students opting for higher studies overseas. In terms of applicability of the decision, an ITAT's decision is binding within its jurisdiction, but carries precedent value in similar disputes for other jurisdictions, which are outside its purview,“ adds Sirwalla.
For the full report, log on to http:www.timesofindia.com
However, such a loan must be taken from either financial institutions, banks or from government-approved charitable institutions. Though Section 80E of the I-T Act states a parent is eligible for claiming tax relief on such loans, it has often been a ground for dispute during tax assessment. The term `higher education' has been defined in Section 80E of the I-T Act as: “Any course of study pursued after passing the senior secondary examination (SSE) or its equivalent from any school, board or university recognised by the central government, state government, local authority or any recognised authority .“
“This section does not specify that higher education must be undertaken by the student in India or that the overseas course must be approved by authorities in India. The only requirement is that such higher education should be undertaken by the student after passing SSE or its equivalent from a recognised institution in India,“ says Parizad Sirwalla, tax partner, KPMG.
Even in this case of Nitin Shantilal Muthiyan, which came for hearing before the Pune tribunal, the tax officer had held that deduction under Section 80E is allowable only in cases of higher education pursued in India. He, thus, disallowed the claim of interest of Rs 73,125 made by the taxpayer whose son, who had completed his BE in Electronics from Pune University, was pursuing a course at George Washington University , US. At the first stage of appeal, the commissioner of I-T (appeals) also upheld the action of the tax officer.
The taxpayer then filed an appeal with the income-tax appellate tribunal (ITAT) and obtained a favourable order. The ITAT in its order observed: “Provisions of Section 80E do not contain any stipulation that the higher education should be pursued only in India. If the intent of the legislation was that education should be pursued in India, in order to avail of the interest deduction, it would have stated so. Further, the taxpayer's son had completed SSE or its equivalent, as is required by this section, before pursuing studies overseas.“ Thus, the ITAT allowed the interest deduction claim made by the father during financial year 2008-09.
“The ITAT's decision is welcome, particularly in light of the spiralling cost of overseas education, and more and more Indian students opting for higher studies overseas. In terms of applicability of the decision, an ITAT's decision is binding within its jurisdiction, but carries precedent value in similar disputes for other jurisdictions, which are outside its purview,“ adds Sirwalla.
For the full report, log on to http:www.timesofindia.com
Source: Times of India, 2-12-2015
