Know All About Tax Benefits of Education Loan
If you are planning to take an Education Loan for financing your study or that of some family member, then it is important to keep some points in mind. It will help you to ensure that besides financial benefits, this loan also provides some Tax Benefits of Education Loan
1. Interest on loan: The two components of the loan repayment are the capital and the rate of interest. Coming to the tax benefits, then these are only offered at an interest rate only. The principal amount, which is paid on the loan, will not get any benefit. The other factor is that there is no upper limit on the amount which will be allowed as a deduction on the interest. Also, it does not affect the amount you require and the kind of higher education that will be financed.
2. Entity: It is the institution from where the Loan has been taken. It also requires an approval form the income tax authorities. Any finance company that fulfills the definition come under this benefit. The banking institutions, which are covered by the Banking Regulation Act, will fall under the list of financial institutions and also other financial institutions notified by the central government.
3. Person: There has to be a specific recipient of the education loan otherwise the benefit is not offered. Earlier the benefit was offered to the person who was paying the loan so, it has to be the person who was studying. Now the rules have changed, and one can take a loan for the study of relatives. The tax benefit will be given to the person who has taken the loan. The relative can be a spouse, children and in case of a legal guardian the student for whom this role is played.
4. Period: The tax deduction can be taken for the period of eight years and it is enough to repay the loan. In case, the loan comes to an end before the period of eight years, then the benefit is given restricted to the term period until the loan was in operation.
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