Education Loan Tax benefits

Education loan comes with its perks! You can avail of tax benefits while repaying your education loan. After receiving a loan sanction for your education, you are eligible for the tax benefits from the tax authority.

What are the tax benefits?

Tax benefits reduce your monetary burdens. The term "tax benefit" refers to any tax law that gives you an opportunity to reduce your tax bill when you fulfill certain eligibility requirements. A tax benefit comes in different forms, such as a deduction or credit. 

The tax benefits can be availed in India and the USA. The Interest paid on your education loan is deductible from your gross taxable income while calculating taxable income. Since STEM students have higher salaries than their counterparts, the tax benefits are quite significant.

Let’s have a look at the tax benefits you can get if you are applying for an education loan to study abroad.

Tax benefits in India

Section 80E of the Income Tax Act, 1961 allows some tax benefits for a loan taken for higher education. Since the entire interest can be deducted, the effective cost of the loan is reduced. Both the applicant and the co-signer are eligible to claim this benefit. This way you can reduce the total cost of the education loan together.

The eligibility criteria which you need to keep in mind:

• Income Tax Deductions can be claimed only on the interest paid.
• The benefit can be claimed by you and your parents, whoever repays the loan.
• You cannot claim deductions beyond 8 years.
• You can avail of tax benefits only if you have taken the loan from an approved institution.

Not all NBFC education loans qualify for a tax deduction, but only those NBFCs notified by the central government via official Gazette as a ‘Financial Institution’ are eligible. Rest assured; Leap Finance has got you covered!

How to claim tax benefits?

You can claim the tax benefits from the year you start paying interest on your loan. If you have started paying interest within the same year of borrowing, then you can claim a deduction for the payment of interest on this loan. 

The maximum period you can claim a deduction is up to 8 years starting the year in which you start repaying the interest on the loan or till the time interest is paid fully, whichever is less.

Tax benefits in the US

The student loan interest deduction allows you to deduct up to $2,500 for the interest which you paid during the year on qualifying student loans. Student loan interest is deductible if your modified adjusted gross income (MAGI), is less than $70,000.

How to know if you’re eligible?

• Income Limits. There is no deduction for taxpayers with MAGI above $80,000 ($165,000 if married filing jointly).
• Restrictions. The loan must have been used to pay for tuition, fees, books, or housing expenses.
• Institution’s Eligibility. Eligible schools are generally accredited, public, or private colleges and universities.
• Loans were taken out for your own education.  If you’re a bright student who is making student loan payments while still in school, you may be able to take this deduction too.

Tax benefits with Leap Finance

Leap finance promises the lowest interest rates with a minimum upfront cost. So, while you repay your loan interest, you can save up to $2500 a year from tax deductions.

You can save a considerable amount on tax benefits.

Our loan repayment reflects in the US credit report. This is important as it improves your credit history. A US Credit history develops your financial footprint which allows you to access services like credit cards, loans and housing.

Want to Know more about Education Loan?

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