10 Things to Know While Claiming Income Tax Benefits on Education Loan

Last Updated : March 15, 2016, 10:28 a.m.

Education loan is a boon for those who are not having enough funds to support their higher studies. The education loan is available to pursue higher studies in India or abroad. You can borrow a loan to pursue a graduate, post-graduate or diploma courses from any prestigious recognised university. Education loan is the best option to support your studies if you don’t have enough funds. This is not the only benefit linked with this special loan. Besides, it also comes with tax benefits for the borrower. The borrower of this loan can avail tax benefits. The co-borrower of the loan is also eligible to claim tax benefits. You can be a co-borrower for your children and spouse. Here are some important things which you should remember while claiming tax benefits on education loan.

1. You can claim tax benefits only on the interest paid against the loan amount. The principal amount does not qualify for claiming tax benefits.
2. You can claim for entire interest part of loan repaid while calculating your taxable income. There is no upper cap for claiming tax benefits on interest amount paid against your education loan.
3. You can claim the tax benefits against the education loan for self, children and spouse, or for the students he/she as a legal guardian. You cann’t claim tax benefits if you are a co-borrower for sibling or other relatives under section 80E.
4. You can claim the tax benefits under section 80E for education loan if you are a borrower or co-borrower of that loan.
5. You can claim tax benefits for the loan taken to pursue higher studies abroad. In that case also, there is no upper limit to claim tax benefits to interest amount repaid.
6. You can claim tax benefits only if you have borrowed the loan from any national, international or notified financial firms or from any other approved charitable institutions. But you can’t claim tax benefits if you have borrowed the money from your family, friends, relatives, employer at personal level.
7. You can claim tax benefits for all fields of studies including vocational pursued from a recognised university, college and institute for full-time or part-time basis. In case of Indian university or college, the institute should be recognised by Central Government, State Government or local authority or other authority authorised by Central or State Government to do so.
8. You can claim tax benefits only once you start repaying loan amount. The maximum tenure to claim the tax benefits is up to 8 years or till the time you are paying interest on the loan amount, whichever is earlier.
9. Most of the education loan comes with moratorium period. This means you are not supposed to pay the loan during this period. The maximum tenure is up to 12 months after the completion of course or after 6 months once you start working. If you start paying your loan amount during the moratorium period, you can claim tax benefits for the amount you have paid.
10. To claim the tax benefits you should report this to HR of your company to make proper calculations and make deductions accordingly.

Education loan to study abroad

After completing the basic education, many students search colleges and universities abroad to pursue their higher education. The number of students who opt for post-graduation courses abroad is comparatively higher than those opting for graduate level courses. Students are also applying for short-term and long-term courses in foreign universities. Apart from USA, there are other countries such as UK, Canada, Australia, Germany and New Zealand, which are equally important among students to study abroad. However, there are many universities in India, which are internationally acclaimed and at par with other international universities. The cost to study in Indian and International universities may vary. It might be the fee for the same course in two or three different universities vary in terms of tuition fee and other charges. Therefore, you should be very sure what are the fee and other charges related to your course.

To get education from any international university or college you need to spend a lot of money as compared to getting education in India. You should never forget that if you are going abroad to get education, you will be spending money for each and everything from staying there in hostel or private accommodation, to food, clothes, and much more. While taking this important decision you should not forget that besides the course fee there are other expenses too, which you should calculate while making your study abroad budget.

You should not forget that taking this decision of studying in any international university requires a lot of financial support once you get enrolled there. There are many banks, which can lend you loan to pursue a course there. You can take a loan upto 20 lakhs to study in any international university, which is universally acclaimed. Many universities offer scholarships and other financial assistance to students. But in most of the international universities, these scholarships and financial aid are merit based. Therefore, it is not possible for every student to get the scholarship or financial aid. You can apply for education loan to realise your dream to study abroad. Here is the list of banks which offer loan to study at any international university.

Axis Bank

Axis Bank education loan aims to offer financial support to those students who have good academic record and want to pursue their higher education in India or abroad. The loan is provided on the basis of the course you opted and fee and other expenditure required to complete your course. You can opt a course at graduate or post graduate level. You can also get loan for diploma course as well.

The maximum loan amount offered by Axis bank to study abroad students is Rs. 20 lakhs. This loan amount will include the tuition fee, hostel fee, equipment fee, lab and library charges, air ticket fair, etc.

Allahabad Bank

Allahabad Bank provides education loan to Indian nationals who secure a seat in any professional or technical courses in any recognised institution in India or abroad. The loan is offered to pursue graduate, post graduate and diploma courses. You can take a loan for courses such as medicine, management, science, technical, engineering and computer, etc.

The maximum loan amount offered by the Allahabad bank is Rs. 20 lakhs to those students who want to study abroad. The maximum repayment period for the loan is up to 7 years.

Punjab National Bank

The PNB provides the PNB Saraswati scheme to offer education loan to meritorious students to pursue higher education in India or abroad. The bank provides loan to support your graduate, post graduate studies from any recognised national or international university. The loan is offered for technical and non-technical courses as well. You can apply for the loan once you secure a seat in the prestigious institute to pursue your desired course.

The highest cap for the loan amount is Rs. 20 lakhs for the duration of up to 15 years. You should start repaying the loan after six months once you get the job or after once year from course completion date, whichever is earlier.

IDBI Bank

IDBI Bank offers education loan to those deserving students who have secured a seat in any of the reputed university in India or abroad. The loan is offered to pursue higher education from any of the recognised institution. The loan is offered to pursue various courses such as management, medicine, science, technology, aviation, engineering, and computer, etc.

The highest amount offered to pursue a course in any of the international university is Rs. 20 lakhs. The repayment period to pay the loan amount is from up to 10 years to 15 years depending upon the loan amount.

HSBC Bank

HSBC bank offers education loan to deserving meritorious students to pursue their education in India and abroad. The bank offers loan in affiliation with Global Student Loan Corporation. The main objective to offer this loan to students is to enable students to pursue their dreams of getting world-class education. This loan covers the cost of tuition fee, hostel charges, books, stationary, library fee, lab charges, computer fee, and other fee related to college and programme.

The maximum loan amount offered is Rs. 1 crore for the tenure of up to 15 years. The amount of loan depends upon the programme fee, tenure and other charges related to your study and stay in that particular country.

Indian Overseas Bank

The Indian Overseas Bank Provides education loan to students who have already secured admission in any professional or technical course in any foreign university. The loan is available for graduate and post graduate courses only offered by recognised and reputed universities.

The maximum loan amount is up to Rs, 40 lakhs for pursuing a course in any prestigious university abroad. The repayment period for loan is upto 5 years to 7 years depending upon the loan amount. The loan can be repayed after six months once you get the job and after 12 months of completion of the course, whichever is earlier. asis once you secure admission in any recognised and acclaimed university or college in courses such as medicine, engineering, science, computer, architecture, business studies, managements, etc. You can opt a course at graduate or post graduate level. You can also get loan for diploma course as well.