A Complete Guide on Tax Benefits of Student Loans
With the growing costs of Education, parents are taking up Education loan increasingly to fund their child’s educational needs. An education loan not only funds higher studies but also provides tax benefit on Student loan. Under Section 80E of the Income Tax Act, the interest part of the loan is eligible for tax benefit. Banks offer a moratorium period for repayment of the loan after completion of the course. The tax deduction is possible as long as the repayment process is on way. The eligibility for interest deduction under 80E is available only if an individual is directly associated with the borrower (for example parents, spouse or any legal guardian). For any other member of the HUF or other types of Assessees, this tax benefit is not valid.
Some important points to keep in mind while availing this benefit:
The student loan tax benefit is applicable even when a loan is taken for studying abroad.
The tax deduction can be availed only when taken in his/her name who is supposed to benefit from the deduction.
Section 80E is valid only if the loan is taken from a recognised bank or notified financial institute.
At present, the Government of India also has a CSIS scheme which offers a complete rebate on the interest rate to be paid during the moratorium period for students whose gross family income is less than 4.5 lakhs per annum. Bank managers are supposed to identify eligible borrowers and submit their claim for Education loan subsidy through the Canara Bank’s Portal. Students are also advised to ensure that the bank submits the subsidy claim within the specified date.
