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Education loan via Vidya Lakshmi and interest deduction (old Sec 80E, new Sec 129)

  • An education loan's interest is fully deductible for up to 8 years if the right person borrows from an eligible lender.
  • Deadline: Apply once admission is confirmed and before fees are due; claim the deduction from the year interest payment starts, for that year and the next 7
  • Done in 2 working days after admission and loan details
  • Prepared by your Savvy, checked by a CA
  1. Admission letter and course details
  2. Who will be the main borrower
  3. Decide borrower and co-borrower
  4. Borrower and lender plan with tax saving estimate
The law and the stepsPay and start · ₹1,499One time, with a yearly claim for up to 8 years, + 18% GST

Answer in brief

An education loan's interest is fully deductible for up to 8 years if the right person borrows from an eligible lender. We help you apply through the Vidya Lakshmi portal, choose who should be the borrower, and plan the yearly deduction so it is not lost.

Every paid answer is checked by a CA. Free AI answers are labelled until a CA verifies them.

From the official sources

What the law says, and what trips people up

From the official portal's manuals and FAQs, with the source for each point.

The law

  • Income-tax Act 1961, Sec 80E (now Sec 129; up to tax year 2025-26)

    Individual can deduct interest paid on a loan from a financial institution or approved charitable institution for higher education of self or a relative, for the initial year and the next 7 years or until interest is paid, whichever is earlierSource

  • Income-tax Act 1961, Sec 80E(3) (now Sec 129)

    Relative means spouse, children or a student of whom the individual is legal guardian; higher education means any course after Senior Secondary from a recognised body; financial institution means a bank or an institution notified by the Central GovernmentSource

  • Income-tax Act 2025, Sec 129 (from 1 April 2026)

    Same deduction carried over: interest on higher education loan, initial tax year plus seven tax years, same definitions of relative, financial institution and approved charitable institutionSource

  • Notification 79/2010 under Sec 129 (old Sec 80E(3)(b)), saved by Sec 536(2)(j) of the 2025 Act

    Example of an NBFC (Credila) notified as a financial institution; earlier notifications stay valid under Sec 129(3)(b)Source

  • New tax regime (default)

    The education loan interest deduction is available only under the old regimeSource

  • Government fee

    No government fee. Loan processing fee and interest are set by the lender.

On the portal

  1. Register the student on vidyalakshmi.co.in with email and mobile
  2. Fill the common education loan application form
  3. Search and select banks or schemes and apply
  4. Upload documents and track status for each application on the dashboard
  5. Each year, file the return on incometax.gov.in under the old regime and claim the interest

What trips people up

  • Loan from a non-notified NBFC, a relative or a foreign lender claimed under 80E

    Only banks, notified institutions and approved charitable institutions qualify; check notification before borrowingSource

  • Principal repayment claimed along with interest

    Only interest is deductibleSource

  • Claim continued after 8 years

    Stop after the initial year plus 7, even if the loan is still runningSource

  • Parent claims though the student is the sole borrower

    The person who took the loan and pays interest claimsSource

  • Claim made under the new regime

    Switch to old regime if worth it; otherwise no deductionSource

  • HUF or company tries to claim

    Only individuals can claimSource

People ask

Is there a limit on the deduction?

No. The entire interest paid in the year is deductible.Source

For how many years?

The year you start paying interest and the next 7 years, or until interest is fully paid.Source

Does a course abroad qualify?

Yes, courses in India or abroad after Class 12 qualify.Source

Can I claim for my child's loan?

Yes, if you are the borrower and pay the interest.Source

What changes under the Income-tax Act 2025?

The deduction moves to Sec 129 from 1 April 2026 with the same conditions.Source

My loan is from an NBFC. Does it qualify?

Only if the NBFC is notified as a financial institution; earlier notifications continue under the 2025 Act.Source

IDFD

How we solve it: 4 steps

Every line tracked live.

Step 1 of 4 · What we need from you

Tap each one you already have

Ready0 / 7
  • Admission letter and course details
  • Lender name and type
  • Loan sanction letter
  • Yearly interest certificate
  • Borrower's relation to student
  • Year interest repayment started
  • Tax regime of the claimant

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One time, with a yearly claim for up to 8 years. Delivered in 2 working days after admission and loan details. Due: Apply once admission is confirmed and before fees are due; claim the deduction from the year interest payment starts, for that year and the next 7

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