Given the fact that education inflation in India hovers around the 7% per annum-mark, you may consider financing your child’s higher studies with an education loan when the time comes. Student loans offer able assistance and because of the moratorium period, seem easy to repay. Moreover, this loan offers certain tax benefits. However, before you apply, take a look at the three things you should know about tax breaks on an education loan.
It can be tempting to jump the gun and conclude that as is the case with a home loan, you get a tax relief on both principal and interest repayment. However, with an education loan, tax benefits are restricted to interest repaid only. You get this deduction via the Section 80E of the IT Act and there is no cap on deduction you can claim.
You can claim education loan tax deductions for a period of 8 years, commencing in the year that you begin to pay your EMIs. Further, the period of deduction ends before 8 years in case you clear your debt earlier.
Another important factor to bear in mind is that you can claim a deduction on loans taken to fund higher studies only. This is inclusive of all programmes that your child pursues after passing the SSE examination. The course may be undertaken in India or abroad.
However, it’s also important to note that while you can claim education loan tax benefits on a student loan taken for you, your children or your spouse, you cannot avail them if you have taken the loan for your relatives, including your siblings. Further, education loans of over Rs. 4 lakh tend to require a guarantor and to access financing over Rs.7.5 lakh you may need to pledge a collateral. This, along with the fact that this loan has strict eligibility terms and is sanctioned to a select few, makes relying on education loan a little less safe. A worthy alternative is a personal loan from a reputed lender.
Bajaj Finserv, for instance, offers a personal loan for higher education that you can count on. Take a look at how it trumps a conventional education loan.
High, collateral-free sanction: Lenders like Bajaj Finserv offer loans of up to Rs.25 lakh that you can use to finance any course of your choice. Moreover, you can avail the sanction without pledging an asset as security.
Restriction-free usage: The funds are disbursed to your account and you can use them to pay tuition fees, hostel accommodation charges, transport costs, and any other expenses you deem fit.
Easy eligibility: The terms are not institute-centric and the loan isn’t awarded on the basis of academic merit. Your ability to repay the loan and your credit score are taken into account here. You can get approval in as little as 5 minutes and disbursal to your account in 24 hours.
Flexible repayment tenor: With lenders like Bajaj Finserv you can repay comfortably, over a tenor of up to 60 months. You can use the personal loan calculator to forecast your EMIs and plan for repayment according to your financial capabilities.
Further, when you partner with Bajaj Finserv you can sign up for a flexi personal loan. This allows you to borrow from the sanction in parts, as and when you need to, without submitting fresh applications. You pay interest only on the total amount that you utilise and you can part-prepay at nil extra charge. Additionally, you can pay interest-only EMI payments for the initial part of the tenor.
As is evident, a personal loan for higher education is far more versatile than an education loan. In fact, when you opt for Bajaj Finserv, you can expedite the entire process when you check your pre-approved offer. Upon entering basic details, you can unlock instant approval through a customised deal.