Neeraj Chauhan, CEO of The Financial Mall, said: “Although student loans can be repaid by children after they start earning money, there is no provision for student loans. retirement. ”
Interest paid on an education loan can be claimed as a deduction under Section 80E with no upper limit. This will reduce the actual cost of the loan for you (see table). The maximum benefit goes to those in the highest tax bracket, with the 10% interest rate falling to around 6.8%.
However, this benefit is only available for eight years from the year in which the deduction is first claimed. In addition, the benefit will gradually decrease as the loan is repaid.
Most regular commercial banks offer loans of up to Rs 40 lakh for education abroad. The interest rates offered on study abroad loans range from 9.5% to 14%. The loan amount covers tuition, living expenses, travel expenses, expenses related to books, equipment, library and exams and the insurance premium for the student.
A key requirement for a study abroad loan is that it needs a co-applicant, who can be a parent, spouse, or sibling. If the borrower goes abroad during the repayment period, the lender will recover the outstanding amount from the co-applicant.
Tax benefits on student loans
If you take out a student loan of Rs 10 lakh at 10% for seven years, here is what the effective monthly EMI will be after the tax savings.
The effective interest rate and the EMI have taken into account the 4% surcharge on the tax.