Section 129 of the Income-tax Act, 2025 — Deduction for Interest on Education Loan (Old Section 80E)

In plain language

What Section 129 is about

Section 129 of the Income-tax Act, 2025 lets an individual claim a deduction for the interest paid on a loan taken for higher education — of themselves or a close relative. This is the re-numbered successor of the well-known Section 80E of the Income-tax Act, 1961. The provision takes effect from 1 April 2026 and the substance is carried forward almost word-for-word, so anyone familiar with 80E will find 129 nearly identical.

The single most important feature — NO upper limit

• Only the interest component qualifies. The principal (EMI's capital portion) is never deductible under this section.
• There is no monetary ceiling. Unlike Section 123 (old 80C) which caps at ₹1,50,000, Section 129 allows the entire interest actually paid in the year, however large. If you paid ₹2,80,000 of interest in a year, all ₹2,80,000 is deductible.
• It reduces your gross total income — it is a Chapter VIII-type deduction, subtracted before tax is computed on the balance.

Who can claim it

• Only an individual — not a HUF, firm, company or any other entity.
• The loan must be for the higher education of self, spouse, children, or a student for whom the individual is the legal guardian (the definition of "relative" in the section).
• The interest must be paid out of income chargeable to tax.

Conditions you must satisfy

• Approved lender only. The loan must be from a financial institution (a bank governed by the Banking Regulation Act, 1949, or an institution notified by the Central Government) or an approved charitable institution. A loan from parents, relatives, friends, or an employer does NOT qualify.
• Higher education means any course pursued after passing the Senior Secondary Examination (Class 12) or its equivalent, from a school, board or university recognised by the Central or State Government. This is broad — it covers graduate, post-graduate, professional, and vocational courses, in India or abroad.
• Interest must actually be paid in the tax year — this is a payment-based (not accrual-based) deduction.

The 8-year rule

The deduction is available starting from the "initial tax year" — the year in which the individual first starts paying interest — and continues for that year plus the seven immediately succeeding tax years, OR until the interest is fully paid, whichever is earlier. So the maximum claim window is 8 years. If the loan is repaid in 5 years, the benefit ends in 5 years; you cannot carry unused years forward beyond the 8th year.

Old vs new tax regime — a crucial caveat

Under the Income-tax Act, 2025, most taxpayers default to the concessional regime under Section 202 (successor to 115BAC). Historically, the education-loan interest deduction (80E) was not available under the concessional/new regime. Taxpayers who want to claim Section 129 should verify whether they are computing tax under the old regime, as the concessional-regime restrictions on Chapter deductions generally continue. When in doubt, confirm regime eligibility before relying on this deduction.

Practical implications

• Because there is no cap, an education loan can be a very tax-efficient way to fund studies — especially costly foreign or professional courses.
• Keep the interest certificate from the lender (bifurcating interest and principal) as documentary proof.
• The 8-year clock starts when you begin paying interest, so plan repayment to extract maximum benefit within the window.