Similar to a home loan, you can also claim income tax benefits on your education loan on property. However, Section 80E is applicable in the latter’s case rather than Section 80C and 24(b) in the case of the former.
Education loan tax deductions under Section 80E
You have to know the various education loan scheme details to make the right claims. There are few points to note to avail the tax benefits:
1. Tax Benefits Only On The Interest Paid
You can claim tax deductions only on the loan against property interest paid and not on the principal part under Section 80E.
It is necessary to avail a certificate from your lender that separates the loan interest and principal to make the claims.
2. No Limit To Deductions
The entire interest amount that you pay on your loan against property for education is deductible and there is no limit.
3. Limited Period Of Tax Benefits
You can avail the tax benefits for a maximum of 8 years. Hence, you will not be able to make the claims for the years beyond. Likewise, the tax benefits will also be limited to the tenor if it is shorter than 8 years.
Do note that the tax benefits are valid only if you use your loan against property for higher educational purposes.
Other Benefits Of Education Loans
Check the education loan details to know its other features in addition to tax benefits. Some of these are mentioned below:
I. High Funding Available
Reputed lenders like Bajaj Finserv provide up to Rs. 1 Crore to salaried customers and up to Rs 3.5 Crore to self-employed ones with their Loans Against Property for Education.
They also bring you pre-approved offers on numerous financial products that include both secured advances like home loans, and unsecured advances like personal loan, business loan. These offers streamline the application process to avail such financial assistance and make the process comparatively convenient.
II. Prolonged Tenure For Repayment
The repayment period of a loan against property for education can extend up to 20 years. Make sure to choose the tenure based on how much EMI you can afford. For example, a longer tenure lowers your monthly instalments compared to a shorter one. However, longer tenure also increase your total cost of loan compared to shorter ones.
Take a look at the following example to understand better:
Mr. A has a loan for education in India of Rs. 50 Lakh at 11% rate of interest for 12 years. He pays EMIs of around Rs. 62,000. The total amount he has to repay is about Rs. 90 Lakh.
Mr B. also availed the same loan amount at the exact interest rate, but with a tenure of 17 years. His EMIs is around Rs. 54,000. However, the total amount he has to repay is Rs. 1.10 Crore.
III. Quick Disbursal Of Funds
NBFCs can disburse a loan against property for education within four days. Make sure to check education loan details to know the disbursal time.
IV. Foreclosure And Part-prepayment Facility
Foreclosing the loan before the tenure ends helps you to save on interest. On the other hand, part-prepayment lets you reduce either your loan tenure or EMIs and also save on interest.
Some NBFCs also don’t charge any additional fees when you foreclose or part-prepay the loan if it is based on floating rate of interest. Check the other charges applicable on loan against property before applying.
V. Balance Transfer Facility
A balance transfer facility is beneficial when another lender is offering a lower rate of interest on their education loan in India. In such a case, you can transfer the remaining loan balance to the new lender. Hence, you get to enjoy lower EMIs and eventually reduce the total cost of loan.
VI. Minimum Documents To Apply
Loans against property are disbursed quickly, owing to the minimum documents required to apply. For instant approval the documents required for education loan include:
- Documents of the property you want to mortgage.
- Aadhaar or PAN.
- Bank account statements of the previous three months.
- Address proof – Any KYC document with your permanent address, electricity bill, telephone bill, water bill, gas bill, etc.
- Income tax returns.
- Latest salary slips.
You must learn all education loan details before you choose the right one. Also, make sure to know how to apply for a loan against property for education before planning your finances.