5 conditions that allow tax benefits on study.

Study loans in India have opened the gates to pursuing higher education. They help students learn their choice of courses. This helps students get the finances that they require to complete their higher education. To make study loans more profitable and accessible to students, the government of India offers tax benefits on the interest accrued on such types of loans.

In this article, we will tell you about the 5 conditions that you need to fulfil while borrowing money to fund your higher studies. This will help you get tax benefits on the interest you pay while repaying that borrowed money.

1) Only you and your co-borrower can claim tax benefits

When you are applying for study loans in India, you and your co-borrower are responsible to pay it back. A co-borrower can be your father or mother or legal guardian or spouse.  As only you and your co-borrower are responsible for repaying the study loan, only you two can claim tax benefits on the interest you pay on your study loan.

2) You need to take a study loan from an RBI-recognised financial or charitable trust

The study loan you take should be from a recognised lender if you want to claim tax benefits on the interest accrued on it. Any financial or charitable lending institution recognised by the Reserve Bank of India (RBI) is a recognised lender. If you take a study loan from a relative or friend, that loan does not qualify for tax benefits on the interest levied on it.

3) The loan amount should only be used for financing your higher education

You can claim tax benefits on study loans in India but the loan money needs to be solely used for funding higher education. To ensure this, a general rule states that the lender provides the money directly to the university as the course tuition fee. And the amount of money the student needs to pay the living expenses is transferred to the co-borrower’s bank account. The study loan money cannot be used for any purpose other than funding higher education.

4) You can claim unlimited tax benefits based solely on the interest of the study loan

The tax benefits you get on the interest you pay on the education loan is unlimited. It means that the income tax levied on your earnings will be deducted by an amount equal to the interest you paid on your study loan in that financial year.

5) You can claim tax benefits up to a maximum of 8 years into the repayment tenure

The government gives you tax benefits on your study loan up to a maximum period of 8 years. If you repay your education loan within 8 years, say—5 years, then you will get tax benefits up to 5 years only. So, these are the 5 conditions that govern how much benefit you can claim on interest on study loans in India. All the best!