SBI Student loan -Tax benefit

I am welcoming all the Students and their parent and guardians who have taken Student or Education loan or proposing to avail the same from any bank in India for their child's higher studies in India or abroad to my this post and happy to inform all of you that you can get Income Tax rebate. It will be great help to those who are not aware of this benefit. Many of us may not be aware of the fact that the Tax exemption on the interest amount paid for the education loan can be availed. This can reduce the overall burden of cost on education or student loan.

You can refer to the section 80 E of Income Tax Act where detailed about this exemption has been explained. Once you have taken the education loan, you can claim deduction under section 80E of Income tax Act for the sum of interest paid on the loan amount. The amount of interest paid is eligible for deduction and you can deduct the whole interest from your taxable income.

Previously there was a restriction on the tax benefit to be deducted from the income. Only Rs.40,000.00 per year or the total amount including the principal and the interest paid during the year, which is less, was allowed as a tax benefit.

But the tax deduction is only available, if the purpose of loan is to pursue higher education to complete full time studies in graduate or post graduate course.This tax benefit on education or student loan are only available when you start the repayment and they are available only upto eight years. For example, if your loan repayment exceeds eight years, you cannot claim for deduction beyond eight years.

Hence it is wiser that the education or student loan is repaid within eight years. Unless the loan amount is very high and it is very hard to afford a high amount of equated monthly installment (EMI), one should not opt for education or student loan with longer period.

It may be noted that, this benefit is only available if the loan is taken from a financial institution or from a bank. Loan taken from friends or relatives will not be considered for tax benefits.

As per the provision in section 80E of Income Tax Act, any amount paid by you in the previous year, out of your taxable income, by way of repayment of loan, taken by you from any financial institution or any approved charitable institution for the pupose of pursuing higher education or interest on such loan, provided that the amount which may be so deducted shall not exceed Rs. 25,000.00.

The deduction mentioned in sub-section(1) shall be allowed to calculate the total income in respect of the initial assessment year and seven assessment years immediately after the initial assessment year or until loan referred to in sub-section (1) together with interest there on is paid by the assessee in full, whichever is earlier.

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Online Student Loan

Online Student Loan:
Some of the banks in India has initiated to provide financial support as an Education Loan to needy students to pursue technical and professional courses. To provide “Education Loan” hassle free and without delay, all Indian Banks has simplified the process and have developed an “Online Application” to apply online for Student loan. However, some of the banks have not yet made Education Loan process online, in that case interested students will have to submit their filled application in their nearest bank’s branch.

Eligibility for Education Loan
Applicant must be an Indian National.
He must be over 18 years of age but within 30 years on the date of application.
Secured admission to Professional/ Technical courses through Entrance Test/ Selection Process .
The Loan Scheme would be applicable only for studies in recognized technical and professional courses in India and abroad.

The student applying apllying for the student loan should not have outstanding education loan from any other Institution. Branch nearest to the permanent residence of student will consider the loan.

Eligible Courses:

Studies in India (Indicative list):
Graduation courses: BA, B.Com, B. Sc etc.
Post Graduation courses: Masters and Ph.d
Professional courses: Engineering, Medical, Agriculture, Veterinary, Law, Dental, Management, Computer etc.

Computer certificate courses of reputed institutes accredited to Department of Electronics or institutes affiliated to university

Courses like ICWA, CA, CFA, etc.

Courses conducted by IIM, IIT, IISc, XLRI, NIFT, NID and other Institutes set up by Central/State Government

Evening courses of approved institutes

Other courses leading to diploma/ degree, etc conducted by colleges/ universities approved by UGC/ Government/ AICTE/ AIBMS/ ICMR etc.

Courses offered by National Institutes and other reputed private institutions with prior approval of Head Office

Courses offered in India by reputed foreign universities with prior approval of Head Office

Note:
Professional courses not approved by AICTE and conducted by Institutes not recognized by State Universities is outside the purview of the eligibility under the scheme
Special scheme for students admitted to IITs, at concessional rate of interest
Studies abroad

Graduation: For job oriented professional/ technical courses offered by reputed universities
Post Graduation: MCA, MBA, MS etc.

Courses conducted by CIMA - London, CPA in USA, etc.

School Education/ Intermediate/ Graduation Courses/ Post Graduation Courses/ Professional Courses: Engineering/ Medical/ Agricultural/ Veterinary/ Dental/ Physiotherapy/ Nursing/ Law/ Management/ PGDRIM/ ICWA/CA/ CFA/ IIM/ IIT/IISC/XLRI/NIFT and other courses approved by State/ Central Government. All other courses leading to diploma/ degree etc., conducted by colleges/ universities approved by UGC/ Govt./ AICTE/ AIBMS/ ICMR etc., and offered by National Institutes and other reputed private institute
Maximum loan amount

Bank provides need based finance subject to repaying capacity of the parents/ students with a maximum of Rs. 10.00 laksLoan limit for studies in India- Maximum Rs.10.00 lakh. Loan limit for studies abroad- Maximum Rs. 20.00 lakh.

Margin for loan:
Upto Rs.04.00 Lakh : NilAbove Rs. 04.00 : 5%

Security for loan:
Upto Rs. 4 lakh : No securityAbove Rs.4 lakh & upto Rs.7.5 lakh: Collateral security in the form of a suitable third party guarantee.Above Rs.7.5 lakh: Collateral security of suitable value or at the discretion of the Bank, suitable third party guarantee along with the assignment of future income of the student for payment of installments

Note:The security can be in the form of land/ building/ Government Securities/ Public Sector Bonds/ NSC/ KVP/ LIP/ Banks Term Deposit etc, in the name of Student/ Parent/ Guardian/ Guarantor with suitable margin.

Mode of disbursement of loan
The loan amount should be released in proportion to the number of years, depending upon the progress of the student. The scholar should produce a certificate from the competent authority for successful completion of academic year for further releases.

Repayment of loan:
Repayment holiday/Moratorium : Course period + 1 year or 6 months after getting job, whichever is earlier. The loan is to be repaid in 5-7 years after commencement of repayment. But, loan period is varying from bank to bank and it determined on the basis of course.

Processing fee:
However, some banks does not charges processing fee for education loan whereas charging fees on actual.

Other conditions:
Loan to be disbursed in stages as per requirement/ demand, directly to the Institution/ Vendors of books/equipments/instruments to the extent possible
Student to produce mark list of previous term/ semester before availing next installment,
Student / Parent to provide latest mailing address, in case of any change,
Student /Parent have to inform branch immediately on change of course /completion of studies/ termination of studies/ any refund of fees by college/ institution/ successful placement/ intention of job/ change of job etc.,

Branch for sanction for loan:
Education loan is sanctioned by the branch nearest to the place of domicile of the borrower. However, if the student is seeking admission to an institute at a place other than the place of domicile/ residence of parent/ guardian and applicant desire to take loan at the place of educational institution, the loan can be considered by a branch at the place of educational institution, provided we have a branch at the place of domicile of the student/ parent/ guardian. The parent/ guardian and the guarantor (wherever applicable) along with student will visit the branch sanctioning/ disbursing the loan for completion of formalities and documentation.

Document required:
Completed application form
Mark sheet of last qualifying examination,
Proof of admission, schedule of expenses and duration of course,
Fee structure (Letter/Certificate from the College/University)
2 Passport size photograph
Identity proof (Passport/ ID Card/ Voter ID Card/ PAN Card etc) of student/ parent/ guardian and guarantor (wherever applicable)
Proof of residence (Xerox copies of Ration Card or Voters Identity Card or Passport or Electricity or Telephone bill or any such document acceptable to the bank)
Details regarding the guarantor (where loan amount is more than Rs 4 lakhs)
Proof of income of the borrower/ guarantor
Parent's/Guardian's Co-obligation statement
Declaration/ affidavit stating that no Educational Loan is availed from any other bank by the applicant and his parent

Margin (Above Rs.4.00 lakhs): For studies in India: 5%, For studies abroad: 15%
Title deed of the property or other securities and other related papers etc. (in case loan amount is more than Rs 7.50 lakhs)

Collateral, wherever required (LIC policy (surrender value of which should be not less than the loan amount at the time of availing the loan) /Share certificates/Units of UTI etc. Valuation certificate from Bank's approved panel valuer and legal opinion from Bank's panel advocate in case of land/buildings).

Application submission process for education loan:
All public sectors as well as private sector banks provides online facility to apply for education loan. Students/ Parents have choice to either apply through online mode or to submit filled application in nearest bank. After applying online for education loan, concerned student can also check the status of their application online.

Click on bank name to apply online for Education Loan / Student Loan:
Allahabad Bank
Andhra Bank
Axis Bank
Bank of Baroda
Bank of India
Bank of Maharashtra
Canara Bank
Central Bank of India
Corporation Bank
Dena Bank
HDFC Bank
IDBI Bank
Indian Bank
Indian Overseas Bank
Jammu & Kashmir Bank
Oriental Bank of Commerce
Punjab & Sind Bank
Punjab National Bank
State Bank of Hyderabad
State Bank of India
State Bank of Bikaner & Jaipur
State Bank of Travancore
State Bank of Mysore
State Bank of Patiala
Syndicate Bank
Union Bank
United Bank of India
UCO Bank
Vijaya Bank

Note:: Loan amount depends on duration of course and institution and it varies from bank to bank and course to course. Also, rate of interest, processing fee, repayment of loan, margin and security for loan depends on individual bank’s policy.

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