With the increasing education cost, people are making their way towards education loan. According to one of the four credit bureaus in India, the average amount of education loan has gone up from 2.5lakh to 6.77 from 2010 to 2017. When you take any loan, the major concern is to get the lowest possible rate of interest. However, getting low rate of interest is only a way of reducing your loan burden. The major deduction for Education loan can be claimed under section 80E, but did you know that not all the education loans qualify for this deduction.
Borrower’s Eligibility for section 80E benefits
- The taxpayer who is the borrower of the loan can claim deduction only on the interest paid and not on the principal amount.
- Moreover, there is no limit up to which deductions can be claimed for the education loan.
- Deduction can be claimed for a period of 8years or till the time loan is repaid whichever is earlier.
- The borrower of education loan can take it for education of self, spouse, dependent children. So, education loans taken for siblings and relatives does not qualify for deduction under 80E.
- These benefits can turn into a humungous saving over the period of time and you can claim this benefit by taking interest payment certificate from your bank or the lending institute.
Lender’s Eligibility for section 80E benefits
- Most of the students go to bank for education loan as their rate is lower than Non- banking financial company.
- NBFC’s are trying to up their game, but the only drawback is their rate of interest is quite high.
- There are certain criteria for a firm to be eligible for deduction under section 80E.
- The best way by which you can know whether the loan from an NBFC will avail you deduction under section 80E is by asking for a copy of the Income Tax Department’s notification specifying the NBFCs that are eligible for section 80E.
Well, now you know that not all the education loans are eligible for deduction. So, next time you take an education loan don’t forget to check the eligibility.