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ITR Requirements For Education Loan Explained!

How to file ITR for education loans and claim Section 80E? Get to know everything about ITR requirements for education loan.

For students aspiring to study abroad, understanding the significance of Income Tax Return (ITR) submissions is crucial when compiling documentation. These records not only demonstrate an individual’s financial diligence, but also play a vital role in securing educational loans. This article sheds light on the significance of ITRs, ITR requirements for education loan, and how to claim it. By understanding this aspect, prospective applicants can better prepare themselves to meet the necessary financial requirements.   

ITR & Its Significance In Education Loan 

ITRs are essential documents submitted to the Indian Income Tax Department, outlining annual income, expenses, and tax payments for both individuals and businesses. They fulfil legal obligations, reflect financial status, and demonstrate fiscal responsibility. By disclosing income from diverse sources and claiming eligible deductions, ITRs provide a comprehensive view of financial standing. They are vital for tax assessment, enabling refunds and boosting credibility for financial transactions like loan applications.

 ITR, which stands for Income Tax Return, isn’t directly related to education loans. However, there’s a section in the Income Tax Act that provides a tax benefit for interest paid on education loans. This section is  Section 80E similar to education tax credit in other countries.

Understanding ITR Implications On Education Loan Interest Rates

  • When you file your ITR, you can claim a deduction for the interest you paid on your education loan during the financial year under Section 80E.
  • This deduction reduces your taxable income, potentially lowering your tax liability.

In simpler terms, you can’t claim the benefit of an education loan on the ITR form itself. But the ITR filing process allows you to claim a tax deduction for the interest paid on the loan under a specific section (80E).

Different Types Of ITR Forms & Their Meaning

Before selecting the appropriate Income Tax Return (ITR) form for filing taxes, it’s essential to understand the specific criteria and eligibility associated with each form. The table below outlines the various types of ITR forms available and their relevance based on different income sources and taxpayer categories. Understanding these distinctions can streamline the tax filing process and ensure compliance with regulatory requirements. 

Type of FormDescription
ITR-1 (Sahaj)Applicable to individuals with income from salaries, one house property, other sources (interest, etc.), and total income up to ₹50 lakh.
ITR-2Suitable for individuals and Hindu Undivided Families (HUFs) without income from business or profession profits and gains.
ITR-3Designed for individuals and HUFs with income from profits and gains of business or profession.
ITR-4 (Sugam)Intended for presumptive income from Business & Profession.

How To File ITR For Education Loan Purpose?

You don’t directly file ITR requirement for education loan purposes. However, while filing your regular ITR, you can claim a deduction for the interest paid on your education loan during the financial year. This deduction is available under Section 80E of the Income Tax Act. Filing your ITR for the purpose of claiming a deduction on the interest paid on your education loan involves two steps:

Step 1: File your ITR using the appropriate form.

As explained earlier, the ITR form you need depends on your income sources and complexity. Refer to the table given in the section above on “Understanding Different ITR Forms and Their Relevance” to choose the right form.

Step 2: Claim the deduction under Section 80E

Here’s how to claim the deduction within your chosen ITR form:

  • Gather Documents: You’ll need a certificate issued by your lender specifying the interest amount you paid on the education loan during the financial year.
  • Locate Section 80E: While filing your ITR, find the section dedicated to deductions under Chapter VI. This section will likely be named “Deductions under Chapter VI-A” and will have a sub-section for Section 80E.
  • Enter the Interest Amount: In the designated field under Section 80E, enter the interest amount paid on your education loan as mentioned in the lender’s certificate.
  • Review and Submit: Double-check all your entries before submitting your ITR. 

Meeting ITR Criteria For Education Loan Eligibility

Meeting the Income Tax Return (ITR) criteria is crucial for eligibility when applying for an education loan. Lenders often require applicants to submit their ITR documents as proof of income and financial stability. 

An effectively completed ITR requirements for education loan not only demonstrates your financial well-being but also provides reassurance to lenders regarding your ability to repay. Given below are the education loan eligibility with ITR requirements you must know: 

Thorough Reporting of Income Sources:

  • Ensure all income sources are reported, including salary, rental income, and interest income.
  • Meticulously compile and review financial statements and receipts throughout the year to avoid overlooking any income streams when filing your ITR.

Timely Filing of ITRs:

  • File ITRs on time each year without defaults to demonstrate financial discipline.
  • Set reminders for tax filing deadlines and consider using tax preparation software or consulting a tax advisor for accurate submissions, crucial for loan approval.

Reducing Unsecured Loans:

  • Minimise unsecured loans like credit card debt to reflect better financial health and repayment capacity.
  • Assess your debts and create a strategic plan to pay off high-interest loans first, potentially consolidating debts to lower interest rates if possible.

Maintaining Documentation:

  • Keep thorough records of financial transactions, investments, and tax payments to support ITR filings.
  • Organise documents systematically, digitally or in physical files, for easy referencing and retrieval during the tax filing process.

Documentation For Education Loan ITR Requirement 

You’ll need the documents mentioned in the table below while filing your ITR, requirements for education loan irrespective of which ITR form you choose (as long as you’re claiming a deduction under Section 80E).

The documentation for an education loan, including ITR, carries more weight than an application without ITR. The Education Loan Interest Certificate is crucial for claiming the education loan deduction under Section 80E. Refer to the table below for a thorough understanding. 

Document CategoryDescriptionPurpose
Mandatory DocumentsPAN Card, Aadhaar Card (linking with PAN recommended)These are essential for filing any ITR and for verification purposes.
Application formForm 16If your co-applicant is a salaried individual, this form from your employer details your salary income, deductions made (TDS), and other tax-related information.
Loan Repayment DocumentInterest Certificate from your Education Loan LenderThis certificate should specifically mention the interest portion of the EMI you paid during the financial year for which you’re filing the ITR.
Optional (but helpful)Previous Year’s ITR (if applicable)Having a copy of your previous ITR filing can help ensure consistency and avoid errors.

Is Education Loan Approval Based On ITR Status? 

Education loan approval in India is not directly based on your ITR status (filing of Income Tax Return). However, ITRs can play a role in the loan approval process in two indirect ways:

ITR Can Demonstrate Financial Stability (For Co-applicant):  While your ITR filing itself might not be mandatory, lenders often require your co-applicant (parent/guardian typically) to submit ITRs. These ITRs act as proof of income and financial stability, which helps the lender assess the ability to repay the loan.

Considered for Loan Amount (For Some Private Banks): Some private banks might consider your co-applicant’s ITR (or your ITR, if employed) to determine the maximum loan amount they’re willing to offer. A healthy income reflected in ITRs could lead to a higher loan sanction.

Here’s a breakdown:

  • Mandatory Requirement: ITR filing itself is not mandatory for the applicant (student).
  • Important for Co-applicant: ITR submission is often mandatory for the co-applicant to demonstrate their financial capability for loan repayment.
  • Loan Amount Consideration: ITRs (yours or co-applicants) might be used by some lenders to determine the maximum loan amount they’ll offer. 
Did You Know?
If your co-applicant doesn’t have ITRs (due to being self-employed with no income tax filing requirement), some lenders accept alternative documents like bank statements showing consistent income flow.

Education Loan ITR Submission Process

It is important to note for ITR requirements for education loan is that you have to file your ITR separately so that you can claim tax benefits under Section 80E. In between the education loan application process, you must follow the steps given below to file an ITR to save on your interest paid on education loans:  

  • Step 1: Apply for the loan 
  • Step 2: Submit yours and co-applicant documents. 
  • Step 3: Post your loan approval, and when you receive your sanction letter, request an interest certificate. 
  • Step 4: File an ITR online at the relevant government website. 
  • Step 5: Submit your interest certificate along with the application form. 
  • Step 6: Get tax deducted on the interest paid on education loans. 

Understanding what’s needed for your Income Tax Return (ITR) is really important to avoid getting rejected for an education loan and to make sure your application goes smoothly. When you know this, it shows lenders that you’re good with money, which can help you get your loan approved. If you want an easier time, you can try UniCreds. Just see if you qualify and talk to a loan advisor for personalised help and free support. They’ll make everything simpler for you, from figuring out what documents you need to helping you through the loan process. 

FAQs

Q1. Is ITR mandatory for education loans?

No, ITR filing itself isn’t mandatory for education loans, but it can help you claim tax benefits for the interest paid on the loan.

Q2. How much ITR is required to get a study loan abroad?

ITR isn’t directly required in terms of a specific amount for getting a study loan abroad. The loan approval depends on your co-applicant’s income (shown through documents like bank statements in some cases). However, ITRs might be helpful for securing a higher loan amount from some private banks.

Q3. Why is it important to know how many years’ ITR is required for education loan applications?

Banks may ask for the last two years of ITRs for co-applicants or guarantors before approving an education loan application. Doing this helps the lender evaluate your recent financial capability. 

Q4. What if I don’t meet the ITR required for the education loan criterion?

You can get an education loan based on your GRE scores and your co-applicant’s bank statements if you don’t have an ITR. However, you won’t be able to claim the tax benefits under Section 80E. 

Q5. How to claim an education loan interest in ITR?

If you have taken an education loan, your co-applicant needs to file an ITR and claim your education loan interest rate as an expense under section 80E while filling the ITR form. For this, you’ll need to obtain an interest certificate from your lender. 

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How to file ITR for education loans and claim Section 80E? Get to know everything about ITR requirements for education loan.

ITR Requirements For Education Loan Explained!

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