Overseas Education Loan: Chapter 6A of Section 80A for Benefits of Tax

 

 

The students who aspire to study abroad more or less face difficulty in financial help. Education loan to pursue higher education is one of the main means, whereas dome receive funds from their parents and relatives too. By applying some interest on the principal amount various banks and NBFC’s sanction foreign education loans. 


Although taking a loan is atleast a liability for 15 to 20 years, there definitely is a great news for all students and education loan-seekers because the interest paid falls under ‘Deductions’ on the Income Tax returns. You don’t need to pay tax on the interest payment made towards education loans under the Chapter VI-A of Section 80E.


Education Loans and Section 80E

A lot of tax can be saved through your payment of higher education. If one is a legal tax payer then the person’s spouse, children or parents can claim the Income Tax deduction on educational loans taken for higher studies for paying the interest on your education loan.
 

In the previous days, this particular norm where Tax deduction was allowed was only for the full time main stream courses such as Engineering, Medicine, Management, Applied Sciences, Pure Sciences along with Mathematics and Statistics. Huge relief now is that it is applicable for almost all courses, including the Vocational Studies. You can check for the best banks for overseas education loan and apply for the same.

A Few Noteworthy Points

1.    For claiming the tax benefit a certificate issued by the bank is required where every year the amount of interest paid by you on the education loan is calculated.

2.    The tax benefits can be filed only by the students who has taken education loan for abroad studies and the following people

•    the spouse
•    children
•    A legal guardian of the student availing overseas education loan for higher studies abroad

Moreover, only if the loan has been sanctioned on your name you can claim deductions on the loan.

3.    If the loan is availed from a bank, any valid financial institution or any approved charitable trust only then this tax-based deduction is permitted. This means that if the education loan has been taken from some employer, family, relatives or friends, then no deductions are offered. Another important thing to not is that most NBFCs are not eligible for this deduction as well. 

4.    This tax benefit is no longer limited to particular subjects or streams of study in fact it is open for ‘all fields of studies’ (including vocational studies). The criteria is to pass the Senior Secondary Examination or its equal from any school, board or university recognized by the Central Government or State Government or local authority or Central or State Government authorized unit or local authority to do so.

5.    Tax benefits are not valid on the ‘Principal’ amount, they are valid only on the ‘Interest’ amount paid. 

6.    For Section 80E this deduction falls above and beyond the Rs. 1,50,000 deduction permitted under Section 80C.

7.    There is no definite higher limit set which tells us that as per which the rate of interest transforms as deductions.

8.    No higher limit is assigned for the grant of deduction as well in respect of interest lie on the loan for higher education.

9.    You should inform your firm's HR Department or Accounts Department to gain tax benefits on an educational loan, well in time so that lesser TDS is deducted from your pay. If you fail to do so, your money will get deducted and then you will have to claim for it by filing the tax returns.

10.    Only once you start repayment of the education loan you can claim for the which is again is available up to a span of eight years, or until the time the payment of interest incomplete. This means that, if you repay the loan within a period of four years, then you can claim the deduction only for those four years.

Thanks to this provision of the Indian tax law, you can save on tax! So overseas education loan is definitely a great investment. Check out for the overseas education loan requirements and start applying accordingly.

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