Higher education is a stepping stone to a successful future, but unfortunately it often comes with significant financial challenges. Many students in India turn to domestic education loans to fund their academic aspirations. Understanding these tax benefits can help borrowers manage their finances effectively and make informed decisions about loan repayment.
This blog explains everything you need to know about tax benefits on an education loan in India and how Unipay can assist you in securing the best domestic education loan for your needs.
Understanding Tax Benefits on Domestic Education Loan
A student loan is a crucial financial tool that enables students to access quality education without immediate financial strain. To ease this financial burden, the Indian government provides tax benefits on the interest paid under Section 80E of the Income Tax Act, 1961. These benefits help reduce the cost of higher education and encourage more individuals to pursue their academic goals.
If you are planning to take an education loan in India for yourself, your child, or a dependent, it is essential to understand these tax benefits and how to claim them. We simplifies the process of securing a domestic education loan by connecting borrowers with the best loan options available.
How Much Tax Deduction Can You Get?
The tax deduction under Section 80E is specifically for the interest paid on the education loan.
Here’s what you need to know:
1.No Limit on Interest Deduction: There is no maximum limit on the amount of interest you can claim as a deduction.
2. Deduction Duration: The tax deduction is available for up to eight years from the start of the loan repayment period.
3. No Principal Deduction: Only the interest portion of the student loan repayment qualifies for tax benefits. The principal amount does not get any tax deduction.
Since the deduction is only for interest, it is a good idea to plan your repayment accordingly.
Unipay helps borrowers find loans with the most competitive interest rates, ensuring that you maximise savings while repaying your study loan in India.
Who Can Claim Tax Benefits on a Domestic Education Loan?
To be eligible for tax benefits under Section 80E, you must meet certain conditions:
- Who Can Apply: The tax deduction is available to individuals who take an education loan for themselves, their spouse, children, or any student for whom they are a legal guardian.
- Loan Purpose: The loan must be taken for higher education, which includes graduate, postgraduate, vocational, and professional courses in India.
- Loan Source: The study loan must be from a recognised financial institution such as banks, non-banking financial companies (NBFCs), or charitable organisations. Loans taken from relatives or friends do not qualify for tax deductions.
If you are looking for a reliable lender for a domestic education loan, we can guide you through the process and help you secure the best loan options.
Steps to Claim Tax Benefits on Education Loan
Claiming tax benefits on an education loan is a simple process, but you need to follow a few steps:
1. Get a Certificate from the Lender: Your bank or lender should provide a certificate showing the break-up of principal and interest paid.
2. Opt for the Old Tax Regime: The tax benefit under Section 80E is available only if you follow the old tax regime. If you choose the new tax regime, this deduction is not applicable.
3. Include Interest Paid in Your ITR: When filing your income tax return (ITR), report the interest paid in the relevant section to claim the deduction.
We offer complete assistance in managing domestic education loans, from loan application to repayment guidance. Our experts can help you understand the tax implications and maximise your benefits.
Smart Ways to Use Tax Benefits Effectively
Understanding how to make the most of tax benefits can help in long-term financial planning.
Here are some strategies:
- Plan Loan Repayment Wisely: Since the deduction is available for eight years, structuring your loan repayment within this period can help maximise savings.
- Consider the Total Interest Cost: Extending the repayment period may allow you to claim tax benefits longer, but it also increases the total interest paid. We can help you find a balance between tax savings and affordable repayment options.
- Use Savings for Investment: Instead of prepaying the loan, some individuals choose to invest their savings if they can earn a higher return than the loan interest rate. However, this should be done with proper financial planning.
Unipay Forex: Making Education Loans Work for You
A domestic education loan is a great way to finance higher education, and the tax benefits under Section 80E make it even more manageable. Understanding these benefits can help reduce financial stress and make loan repayment easier.
Unipay Forex is dedicated to helping students and parents find the best education loan in India. Whether you need assistance with loan applications, repayment planning, or understanding tax benefits, We are here to guide you. Connect with us today and take the first step towards a stress-free education loan experience.
