The author is a tax and investment expert and can be reached on jainbalwant@gmail.com
Repayment of principal on education loan cannot be claimed as deduction under income tax laws. Interest earned on bond bought in child’s name will be added to parent’s income under clubbing provisions. Tax deduction for NPS is only available to subscriber.
I had taken an educational loan from a nationalised bank for my son’s education. At present, I am paying the equated monthly instalment (EMI) on the loan. Can I claim the tax benefit for interest paid till the loan is cleared, as my son’s earning is not sufficient to pay the EMI?
Under Section 80E of the Income-tax Act, 1961, a person who has taken an education loan for the purpose of higher studies for self, spouse or any children, from any financial institution or approved charitable institutions, can claim deduction in respect of interest paid on such loan under the old tax regime.
So, you can claim the tax benefits in respect of the interest paid on the loan in case you had borrowed the money, or you were a co-borrower for this loan. Do note that the repayment of the principal amount of education loan cannot be claimed for any tax benefit under the provisions of the income tax laws.
I am interested in Reserve Bank of India’s (RBI’s) Floating Rate Savings Bond. Can I buy multiple bonds by one name at different dates? If money is invested in a minor’s name, then who will be liable for the interest and the tax liability – the one who invested, or the parent whose income is higher?
Yes, you can invest in RBI’s Floating Rate Savings Bond as many times as you want. Moreover, there is no upper limit up to which you can invest in these bonds in a year, or cumulatively. The interest on such bonds is floating and is benchmarked against the interest payable on National Saving Certificates (NSC), and it is higher by 35 basis point than that offered on NSC. The interest gets reset half-yearly on June 30 and December 31 every year.
Under the clubbing provisions, the interest earned on the bond bought in the minor’s name will become taxable in the hands of the parents with the higher income, irrespective of who has made the investment.
I am thinking of opening a National Pension System (NPS) account for my spouse. Can I claim the tax benefits available under Section 80CCD while filing my income tax return (ITR)?
Under Section 80CCD, the tax deduction in respect of NPS contribution is available only to the subscriber, unlike in case of Public Provident Fund (PPF), were the parents and spouse can also make contribution and claim deduction under Section 80C. Please note that the deduction under Section 80C and Section 80CCD for your own subscription are available only if you opt for the old tax regime.
The author is a tax and investment expert and can be reached on jainbalwant@gmail.com
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