Chapter VIII - Deductions to be Made in Computing Total Income
Section 129
Section 129: deduction for interest on an education loan
Section 129 is the Income-tax Act, 2025's version of the deduction long known as "80E" - it lets an individual deduct the full amount of interest paid on a loan taken for their own or a relative's higher education, with no upper rupee cap, for a limited number of years.
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Need advice on Section 129?
This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) An assessee, being an individual, shall be allowed a deduction of amount paid 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 succeeding 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 organisation where it was approved earlier under the provisions of section 10(23C) of the Income-tax Act, 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 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.
Introduction
An individual paying interest on a qualifying higher-education loan for self or a defined relative may deduct that interest. The loan source and education purpose must qualify, and the claim runs from the first interest-payment tax year for up to seven succeeding years or until paid earlier.
Key takeaways
Education-loan interest
An individual may deduct interest paid from taxable income on a qualifying loan from a financial institution or approved charitable institution for their own or a defined relative’s higher education.
Time window
The deduction runs from the tax year in which interest payment starts through the next seven tax years, or until the interest is fully paid, whichever happens first.
What Section 129 allows
An individual can deduct interest paid during the tax year on a loan taken from a financial institution or an approved charitable institution, provided the loan was taken for pursuing higher education of the individual or a relative, and the interest is paid out of income chargeable to tax.
There is no cap on the amount of interest that can be deducted - the entire interest paid qualifies, unlike most other deductions in this chapter which are capped at a fixed rupee amount.
How long the deduction runs
The deduction is available starting from the "initial tax year" - the year the assessee starts paying interest on the loan - and continues for that year plus the seven tax years immediately following it (eight years total), or until the interest is fully repaid, whichever happens first.
Key definitions
- "Higher education" means any course of study pursued after passing the Senior Secondary Examination (or its equivalent), from an institution recognised by the Central or State Government or a local authority.
- "Relative" means the individual's spouse and children, or a student for whom the individual is the legal guardian - so a loan taken for a spouse's or child's education also qualifies.
- "Financial institution" means a banking company regulated under the Banking Regulation Act, 1949, or any other institution the Central Government notifies for this purpose.
- "Approved charitable institution" refers to certain registered non-profit lenders previously approved under the corresponding provisions of the Income-tax Act, 1961.
Step-by-step flow for applying Section 129
- 1
Is the loan from a financial institution or an approved charitable institution?
- No (for example, a loan from a friend): No deduction.
- Yes: Go to the next step.
- 2
Was it taken for higher education of the individual or a relative?
Higher education means a course pursued after passing the Senior Secondary Examination or equivalent; a relative means spouse, children, or a student for whom the individual is legal guardian.
- No: No deduction.
- Yes: Go to the next step.
- 3
Is this tax year within the window?
The window covers the initial tax year (when interest payment starts) and the seven tax years immediately following it, or until the interest is fully paid, whichever is earlier.
- 4
Deduct interest paid out of taxable income
The whole interest paid during the year qualifies; principal repayment does not.
Practical checklist
Do
- Keep the lender sanction, course details and annual interest-payment certificate.
- Record the initial tax year when interest payment starts and track the seven following tax years.
Avoid
- Do not claim principal repayment as interest.
- Do not assume any lender or course qualifies without checking the statutory definitions.
Illustrative example
Worked example: interest on a daughter's postgraduate loan
Hypothetical facts (illustration only, not a real taxpayer): Mrs. Nair takes a bank loan for her daughter's postgraduate course. She starts paying interest in a tax year (Year 1), paying ₹85,000 of interest and ₹1,00,000 of principal that year out of her taxable income. She expects to finish paying all interest in Year 6.
Initial tax year
Year 1 is the initial tax year because interest payment starts then.
Year 1 deduction
The full ₹85,000 of interest is deductible; the ₹1,00,000 principal is not.
Window
The window would run to Year 8 (Year 1 plus seven succeeding years), but ends earlier once interest is fully paid in Year 6.
Outcome
- Deduction is available for Years 1 to 6 on interest actually paid each year.
- If interest were still being paid in Year 9, no deduction would be allowed for that year.
Glossary
- Initial tax year
- The tax year in which the assessee starts paying interest on the education loan.
- Higher education
- A qualifying course of study after the specified senior-secondary examination or equivalent.
Frequently asked questions
Is there a maximum amount I can claim under Section 129?
No - unlike most deductions in this chapter, there is no rupee ceiling. The full interest amount paid during the year is deductible.
For how many years can I claim this deduction?
For the year you start paying interest and the next seven years (eight years total), or until the loan interest is fully repaid - whichever comes first.
Can I claim this deduction for my spouse's or child's education loan interest?
Yes - the deduction covers interest on a loan taken for the higher education of the individual themselves or of a relative (spouse, children, or a student under the individual's legal guardianship).
Does the loan have to be from a bank?
It must be from a financial institution (typically a bank or a Central Government-notified institution) or an approved charitable institution - a loan from a friend or family member does not qualify.
Need help applying this provision to your situation?
Check your Section 129 education loan interest deduction with our tax teamLast updated 10 October 2026