You would agree that today education, particularly higher education, plays an important role in shaping our future. It enables us to scale new highs of success in our career, elevate our standard of living, live a respectable life, accomplish
financial goals, and much more!
For these very reasons, every parent aspires to provide the best quality education to their child (within their means). Parents are even saving and investing wisely in this endeavour with the help of a savings account. In addition, children also recognise the importance of being highly educated to be future ready.
But as you may know, quality education comes at a price, a high price. The fees to impart knowledge, plus the ancillary expenses, viz. coaching class fees, uniform, accommodation (for pursuing education in another city/state/country), etc.
have increased. Besides, the cost of higher education has become dearer.
While saving and investing helps to accomplish envisioned financial goals, many times the pace of wealth creation does not keep up with inflation in education and here’s where education loans prove to be a valuable resource that comes
with a tax benefit.
An education loan is available for career-oriented courses like medicine, engineering, management, etc. either at a graduate or post-graduate level in prime institutes in India and abroad. The loan covers tuition fees, examination fees, library
subscription, cost of books, mandated lab tools/equipment, laptop/computer, hostel charges (if any), and so on.
Axis Bank India offers education loan at attractive interest rates for a loan amount ranging from Rs 50,000 to Rs 75 lakh*. This absolutely fuels the dream of taking
up professional or technical education in India or abroad.
If you are a student, you can directly apply for an education loan. However, your parent(s) or guardian will be treated as co-applicants, and their role will be akin to a primary debtor (a person who owes money).
To know the eligibility criteria for education and the documentation involved, click here To know the eligibility criteria for education and the documentation
If you wish to get a sense of how much the Equated Monthly Instalment (EMI) will be on your personal loan, use Axis Bank’s education loan EMI calculator –– it is a comprehensive resource. All you have to do is input the relevant data in the required fields and it’ll produce the result in a split second.
Remember, a higher tenure can reduce your EMIs, making repayments comfortable; while opting for a lower tenure increases your EMI. The maximum tenure for an education loan is usually 10-15 years (including moratorium period).
What is the tax benefit?
Once you avail an education loan, the interest paid (which is a component of your EMI) on the education loan is allowed as a deduction under Section 80E of the Income Tax Act, 1961. The deduction is available for a maximum of 8 years or till
the interest is paid, whichever is earlier.
The deduction is available from the year you start paying the interest on the education loan, and the seven immediately succeeding financial years or until the interest is paid in full, whichever is earlier.
Here a few more points to remember…
• Deduction amount: The deduction amount is allowed on the total interest paid (which is part of the EMI) on education loan during the financial year. There no limit on the maximum amount that is allowed as deduction.
However, there isn’t a tax benefit on the repayment of the principal amount (which is the second part of the EMI). With Axis Bank’s Tax Benefit Calculator you can check
your tax savings.
• Who can claim
the deduction: Only an individual can claim the deduction. It is not available to a Hindu Undivided Family (HUF) or any other kind of taxpayer.
Further, the loan should be taken for the higher education of self, spouse, children, or the student for whom the individual is a legal guardian. Thus, parents can easily claim this deduction for the loan taken for the higher studies of their
• The purpose of the loan: The loan should be taken to pursue higher education irrespective of whether the institution is in India or abroad.
Access to education loans is worth it for the returns you can reap in the long run. So, do consider an education loan; it can be an efficient way to finance your or your children’s education. Apply here for an education loan from Axis Bank.
*case to case basis
Disclaimer: This article has been authored by PersonalFN, a Mumbai based Financial Planning and Mutual Fund research firm. Axis Bank doesn't influence any views of the author in any way. Axis Bank & PersonalFN shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.