Deduction under Section 80E only available for interest paid on education loan. You need to deduct tax while making payment to a non-resident during purchase.
I had taken an education loan for my son’s MBA course from a scheduled bank. I have paid back Rs 1 lakh during the current financial year, i.e., 2022-23. When I requested the bank for certificate under Section 80E for the interest paid, the bank authorities told me that interest accrued during the current year is only eligible for tax relief. Is the bank correct?
Answer: One can claim deduction in respect of interest paid on education loan u/s 80E of the Income-tax Act, 1961. The deduction is available only for interest paid and not for any repayment of principal amount. Only the education loans taken by an individual from a bank, a notified financial institution, or any approved charitable institution for higher education are eligible for this deduction. The deduction is available for eight successive years beginning from the year in which you start paying the interest. The loan can be taken by an assessee for the higher education of himself, his spouse or any child. The deduction for interest is available in the year of payment, irrespective of the year to which it relates. Since the bank is unwilling to issue you a certificate, you can obtain the loan statement by giving details of the principal amount paid along with the interest paid. This should allow you to claim the deduction.
I want to buy a residential property from a person who is a non-resident Indian (NRI) living in the US. Should I deduct tax while making payment?
Answer: Under Section 195 of the Income-tax Act, 1961, any person making payment of any sum, to a non-resident, which is chargeable to tax in India, has to deduct tax at the rates in force.
In your case, it will be difficult for you to find out the proportion of sale consideration which is taxable in India.
You can ask the seller to provide you with documentary evidence about his cost of acquisition with year. This will help you compute the taxable capital gains and deduct the tax accordingly. If the seller does not provide you with the documents, you can deduct tax at a flat rate of 20 per cent on the sale consideration. Please note you will have to obtain tax deduction account number (TAN) and file the tax deducted at source (TDS) returns also.
The author is a tax and investment expert
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