Education loan from NBFC may not qualify for tax deduction
NEW DELHI: Education loans from non-banking financial companies (NBFCs) may not qualify for tax deduction. For a borrower to avail of the benefit, loan must be from government-notified financial institution.
“Regulations state that the loan should be taken from any bank, approved charitable institution or ‘notified’ financial institution. Borrowers can only avail the tax deduction if the loan is from NBFCs that the Central Board of Direct Taxes (CBDT) has notified,” said Naveen Wadhwa, deputy general manager, Taxmann, a research and advisory firm.
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CBDT has notified only a few NBFCs in this case.
A borrower can get the deduction under Section 80E on the interest portion of an education loan taken for higher studies. The student, or a close relative (spouse, children, or legal guardian), can avail of it for up to eight years.
Borrowing for higher education is among the big loans that an individual avails in his lifetime. Like in the case of home loan, tax deduction can help lower the burden of an education loan.
“Not many are aware that CBDT has notified only a few NBFCs. Usually, borrowers approach NBFCs for the interest certificate in March. Whether notified or not, NBFCs give borrowers loan statement that states the principal and interest paid during the year,” said says Arjun Krishna, co-founder, WeMakeScholars.com, an online loan and scholarship consultant.
They submit the statement to their chartered accountants, who avail the deduction, according to Krishna.
