Bharat Cooperative Bank (mumbai) Ltd., Mumbai Education Loan
The most important dream of all parents is that their children get a quality education so that they can lead a bright and successful life. Parents are finding it very difficult to self-finance their children's education due to the increasing cost of higher education. For example, for engineering courses, the fees is around Rs 5-10 lakh, for any medical course at a private college, the fees is appox. in the range of Rs. 40 lakh and Rs. 50 lakh and for professional courses like MBA etc, fees could be around Rs 4-5 lakh. Here comes into picture the importance of Education Loan to cover these education expenses.
Students from various disciplines can now take their first step on the path to success and fuel their dreams for professional or technical education in India or abroad with financial assistance in the form of Education Loan offered by banks so that nothing can hinder their progress.
Education Loan provides financial aid to deserving and meritorious students to pursue higher studies in India and abroad. It helps students to pay their tuition fees, examination, library, books, laboratory and hostel while studying. It also covers travel expenses for studying abroad, study tours, project work, refundable deposit, etc.
Almost all banks in India offer education loans on attractive interest rate and easy repayment options and hence there is a huge demand for loans to cover education expenses.
Benefits of Education Loan
- Provides financial assistance to fulfil the dream of higher education of deserving and meritorious students.
- Loans for a variety of courses are available on attractive rates of interest.
- Female students are often offered discounts or lower interest rates when it comes to education loans.
- Government sponsors subsidy schemes to help students from the economically backward sections of society avail the benefits of education loan.
- Education loans below Rs.4 lakh usually are offered by banks without any security or guarantor.
- The interest paid on the education loan can be claimed as deduction without any upper limit under Section 80E of the Income Tax Act of India, 1961.
Eligibility
- Student must be a Resident Indian. If the applicant is a Non-Resident Indian (NRI), he/she must hold a valid Indian Passport
- Student should be in the age bracket defined by the respective bank
- All education loans must have a co-applicant, usually student's parents or guardian, and the co-applicant must have a regular income to repay the loan.
- Student must have a confirmed admission to the Academic Institution
- A good credit history of the co-applicant or guarantor helps in availing loan easily
- Insurance is compulsory for foreign courses
Loan Amount
Banks offer loans of up to Rs 10 lakh for courses in Indian colleges and up to Rs 20 lakh for studies abroad as per Indian Banks' Association norms. The quantum of a loan depends upon the course and the institution offering this course.
Margin
- Up to Rs.4 lakhs - Nil.
- Above Rs. 4 lakhs 5% for Studies in India and 15% for Studies abroad.
Education Loan Tax Benefit: Deduction under section 80E of the Income Tax Act
The interest paid on the education loan can be claimed as deduction without any upper limit under Section 80E of the Income Tax Act of India, 1961. One can get tax benefit on full amount of interest paid but not the principal amount. This is available on education loan taken for self, spouse and children or someone for whom the individual is a legal guardian. Loans taken from family, friends and relatives for education purpose do not qualify for any tax deduction.
Eligible Person for Claiming Deduction
This tax benefit can be claimed either by the parent or by the child i.e. the person who repays the education loan can claim this deduction which means that the deduction is allowed to the individual who has taken the loan and if repayment is made through income chargeable to tax.
Let's understand it with the help of an example:
Suppose the father takes an education loan for his son and he (father) repays it, so the tax deduction can be claimed by the father. After completing the education, suppose the son starts repaying the loan through the EMIs from his own salary then neither father nor son is allowed to claim deduction because the loan is in the name of the father (who is not repaying the loan) and the loan repayment is being done by the son (who has not taken the education loan in his name).Permissible Amount for Claiming Deduction
Further, the available deduction under section 80E cannot exceed the taxable income which the maximum amount available for deduction can be upto taxable income only. Education loan taken for higher education in India as well as in abroad, both qualifies for claiming deduction under Section 80E of the Income Tax Act, 1961.
This deduction is available for courses, recognised by the government or local authority in India or abroad, for which you can apply after completing your senior secondary education. It is also necessary to take the education loan from a financial institution (bank or non-banking financial company) or an approved charitable institution (under Section 10(23C) or 80G (2) (a) of the Income Tax Act, 1961).
Permissible Period for Claiming Deduction
The maximum period allowed to claim deduction is up to 8 years starting the year in which the borrower starts repaying the interest on the loan or till the time interest is paid fully, whichever is less.