My son is graduating from an American university. I have a personal loan of Rs. 8 lakh, as the State Bank of India (SBI) refused to provide a loan for his tuition fees for education abroad. Can I claim a tax benefit for the amount of tuition fees and for the interest paid on the personal loan for his education?
Answer: There are two separate provisions in the income tax laws that allow a person to claim benefits for expenses incurred in raising children. The first benefit is available under section 80C of the Income Tax Act, 1961 in respect of tuition paid for full-time education at a university or school in India for your two children. The second distribution is available under Section 80E of the Act regarding interest paid on loans made for higher education for a particular family member, including the taxpayer’s children. These student loan benefits are available to study everywhere, and not necessarily in India. To take advantage of this benefit, the loan must be taken out with a charitable trust or with a bank/financial institution.
Since your son is studying outside of India, you will not be able to receive benefits under Section 80C. As for the deduction of interest paid on a personal loan taken out for your son’s education at American University, Section 80E does not specifically mention the word “education loan” but refers to the “loan taken out” with a view to pursuing higher education. In my opinion, you can therefore claim full deduction of the interest paid by you on the personal loan, provided you can conclusively demonstrate that the end use of such a personal loan is intended to finance your child’s higher education.
I own three houses. I sold one in April 2022 and bought another by investing the profit made on the sale of this property within two months of the date of sale. Do I owe tax on such capital gains?
Answer: The answer to your question depends on the period that the house you sold in April 2022 was in your possession. If the gains were held for more than 24 months, the gains are treated as long-term capital gains and you can claim exemption under Section 54 of the Income Tax Act, 1961, as you have already invested the capital gains on such capital gains . home to buy another home within two months. Please note that for claiming such an exemption, there is no limitation on the number of homes the taxpayer can own on the date of sale of the property.
However, if the property has been owned for less than 24 months, such gains will be treated as short-term capital gains and no tax exemption would be available in respect of such gains, even if the gains are reinvested for the purchase of another residential home. Short-term capital gains arising from the sale of such properties will be treated as regular income and will be taxed at the rate applicable to you.
The author is a tax and investment expert.
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