How education loans can be beneficial for tax savings?Situations like these may be avoided, if a student chooses to avail an education loan for higher studies. What’s more, an education loan results in enhanced tax benefits as well under Section 80 E of the Income Tax Act in India. Let’s take you through the features of education loans and tell you how tax deduction works under education loan in 80 E.
How does an education loan work?
At present, education loans from financial institutions in India are available in the range of 8.75-13%. You can avail of a stipulated amount under this loan and repay the loan upon the completion of your professional course. The repayment schedule begins when you start earning.
Who is eligible for an education loan?
A student who wishes to pursue higher education, post the completion of Class 12 (or its equivalent) can avail of an education loan. This loan is also eligible for tax deduction under Section 80 E of the Income Tax Act of India 1961.
When is the income tax benefit applicable on education loan?While taking an education loan, it is important to know that the tenure of the education loan cannot exceed eight years in order to be eligible for an income tax rebate. The benefit is applicable only on the interest amount and not the principal amount of the loan. Further, this loan must be taken from a bank or a financial services outfit that is nationally recognised.
Who can avail of this benefit?
You can claim tax benefit if you are availing of this loan for yourself, your spouse, children or a student for whom you are a legal guardian. Since the student does not have an income on the basis of which he can apply for a loan, his parent is likely to apply for an education loan for him. The parent can thus avail of the income tax benefit while filing income tax returns.
How to get the tax benefit?
When you take an education loan, the interest amount for the assessment year must be mentioned when you file your taxes in order to get the tax benefit. You will have to provide the supporting documents as necessary.
Enhance your tax savings benefits with an education loan
Now that you know how to avail of tax benefits on education loan, you can dream about fulfilling your ambitions of higher education or that for your children. By availing such a loan you can also enhance your tax savings benefits and need not limit tax savings to investments under Section 80 C of the Income Tax Act.