Tax benefits on education loans help you reduce the overall cost of the loan.

• You can claim a deduction under section 80 E of the Income-Tax Act for the interest paid on an educational loan.
• You will get the tax benefit on an education loan only if the loan is in your name and is taken for the purpose of higher education of yourself, your spouse or your children. Education loan taken for the higher education of siblings (brother or sister) is not covered in this regard.
• Earlier, only the lesser of the two amounts was eligible for tax deduction: either the total amount paid during the year (principal repaid and interest paid) or Rs 40,000. Now, this has been done away with; you can deduct the entire interest amount from your taxable income, without any limits. No deduction, however, is available for the principal that you repay.
• These deductions are available only for a period of eight years starting from the year in which you start paying the interest on the student loan.   
• Do remember that you cannot claim tax deductions if your employer, family or friends gives you an education loan. You can get tax benefits only if the student loan is from a financial institution, bank or an approved charitable institution.
• Tax benefits are not available in respect of interest paid on a loan taken for any course. The course has to be for full-time studies (no part-time courses covered) for any graduate or post graduate course in engineering, medicine, management, or for post graduate course in applied sciences or pure sciences including mathematics and statistics.

Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015

1. BNP Paribas Long Term Equity Fund

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4. ICICI Prudential Long Term Equity Fund

5. Religare Tax Plan

6. Franklin India TaxShield

7. DSP BlackRock Tax Saver Fund

8. Birla Sun Life Tax Relief 96

9. Reliance Tax Saver (ELSS) Fund

10. HDFC TaxSaver

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