Three issues to know earlier than claiming tax profit on schooling mortgage repayments
NEW DELHI: Education loans come in useful whereas planning an instructional future, and are a viable various to dipping into financial savings.
“What makes education loans particularly attractive is that unlike home loans or personal loans, education loans come with a moratorium that’s 6-12 months longer than the duration of the course for which you have taken the loan. During the moratorium, the bank expects no Equated Monthly Instalment comes (EMIs) or repayments. This means you have ample time to complete your education and start working before you start repaying your loan,” stated Adhil Shetty, CEO, Bankbazaar.com.
Tax advantages on schooling loans additionally make them enticing. You can declare tax deductions towards schooling loans below Section 80E of the Income Tax Act. However, a couple of issues have to be stored in thoughts earlier than claiming advantages.
First, whereas there is no such thing as a higher restrict on the quantity you’ll be able to declare, you’ll be able to declare tax advantages solely on the curiosity paid on schooling mortgage and never on the principal.
Second, solely the one who avails the mortgage can declare deductions. So, in the event you take an schooling mortgage in your daughter and repay it, you’ll be able to declare the tax deduction. But in case your daughter repays the mortgage together with her personal revenue, neither you nor she will be able to declare deductions. This is as a result of the mortgage is in your identify, however the reimbursement is just not made out of your taxable revenue.
Third, not all schooling loans are eligible for tax exemptions. “Section 80E specifies that solely loans from specified monetary establishments, together with banks and “every other monetary establishment which the Central Government could, by notification within the Official Gazette, specify on this behalf” are eligible for exemptions. So, if you plan to take a loan from a Non-Banking Financial Institution (NBFC), you need to ensure that your loan provider is included in this list,” stated Shetty.
Summing up, an schooling mortgage permits you the funds and suppleness to take up increased schooling and pay for it systematically over an extended interval. At the identical time, it offers you tax breaks that make repayments cheaper.
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