Simplified Laws Guide to Taxation and Legal Concern For studies abroad the estimate received from the institution abroad or USD 100,000, per academic year, whichever is higher, can be transferred from India. Students going abroad for studies are treated as Non-Resident Indians (NRIs). So, the students have to open an NRO account and any educational loan that is availed in India can be repatriated up to USD 1 million per financial year.
Apart from the above, the student may also avail an amount of USD 10,000 or its equivalent for incidental expenses out of which USD 3000 or its equivalent may be carried in the form of foreign currency while going abroad for studies.
Study Loan
The quantum of loan, documentation may vary from bank to bank. So, I have covered the broader aspects of study loan. Hope this article will help as preliminary information.
Course – Job oriented professional/technical Graduation Degree courses or Post Graduation Degree and Diploma courses like MCA, MBA, MS etc. offered by reputed universities are eligible to get loan from Indian Banks. Courses conducted by CIMA (Chartered Institute of Management Accountants) – London, CPA (Certified Public Accountant) in USA etc. are also eligible.
What type of expenses can be considered for loan?
Most of the expenses are covered, to name a few –
- Fees payable to college/school/hostel
- Examination/Library/Laboratory fees
- Purchase of Books/Equipment/Instruments/Uniforms, Purchase of computers- essential for completion of the course (maximum 20% of the total tuition fees payable for completion of the course)
- Caution Deposit/Building Fund/Refundable Deposit (maximum 10% tuition fees for the entire course)
- Travel Expenses/Passage money for studies abroad
- Cost of a Two-wheeler up to Rs. 50,000/-
- Any other expenses required to complete the course like study tours, project work etc.
Loan amount and Interest rate
It depends on the policy of each bank. Generally, for overseas studies you can get up to Rs.30 Lakhs. The interest rate will be in the range of 11.50% and 13.50% . There won’t be any processing fee payable upfront. For higher loan limits, say above Rs.4 lakhs, a margin (means the money to be brought in by you) of 15% is required
When to repay the loan?
Repayment will commence one year after completion of course or 6 months after securing a job, whichever is earlier. The repayment period will range between 10 and 12 years.
Whether any security to be given?
- Up to certain amount (say, Rs. 4 Lakhs of loan) – only parent/guardian/husband/wife/parents-in-law as co-borrower is required, no collateral security to be given.
- If the loan is higher (say, Rs.7.5 Lakhs and above) – tangible collateral security to be given. Co-obligation of parents together with tangible collateral security of suitable value, along with the assignment of future income of the student for payment of installments. The security can be in the form of land/ building/ Govt. Securities/ Public Sector Bonds/ Units of UTI, NSC, KVP, LIC policy, gold, shares/ debentures, bank deposit in the name of student/ parent/ guardian or any other third party.
List of documents required
- Completed Education Loan Application Form.
- Mark sheets of last qualifying examination.
- Proof of admission scholarship, studentship etc
- Schedule of expenses for the specified course
- 2 passport size photographs
- PAN Card of the student and the Parent/ Guardian
- Borrower’s Bank account statement for the last six months
- Income tax Returns/ IT assessment order of last 2 yrs (If IT Payee)
- Brief statement of assets and liabilities of the Co-borrower
- Proof of Income (i.e. Salary slips/ Form 16 etc. if applicable)
Timeline for sanction
Minimum of 15 days and maximum of don’t know!
Income Tax benefit u/s 80E
The interest payment towards the loan is eligible for income tax exemption. Read Take Educational Loan and avail Income Tax benefits. for more information
