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what is student loan in india 2021 [10 important points]

student loan in india
Education loan in 2021

As education cost is galloping along with increasing inflations. There is need of student loan for keeping pace with increasing education cost.

Quality education is a must for a complete and successful life all together. For many, it is equivalent to graduating from a top institution in India or abroad.

Keeping this in mind, parents/guardians, who want to provide their children with the best possible education, invest their money in different asset classes viz. Mutual Funds (MFs), ULIPs, Fixed Deposits (FDs), Sovereign gold bonds, etc.

Despite all this, one may still encounter a shortage of funds. A student loan, therefore, plays a vital role in such a scenario by helping to bridge the gap between the shortfall and the required amount.

Education loan in India

HDFC Bank provides student loan up to ₹ 20 lakhs. There is no collateral for a loan of up to ₹ 7.5 lakh.

Loan Amount (Rs.)Repo RateSpreadEffective ROI
(Linked to Repo Rate)
Up to 4 Lakhs4.00%11.20%15.20%
Loans greater than Rs. 4 Lakhs and up to Rs. 7.5 Lakhs4.00%10.70%14.70%
Loans greater than 7.5 Lakhs4.00%9.70%13.20%
Loan rates of a Pvt Bank
  • The Bank is free to decide the spread over the Repo Rate. The spread may undergo a change during the tenure of the loan.

  • Customers who have already availed disbursement or received a sanction prior to October 1, 2019 will continue to operate on MCLR. Existing customers can get in touch with our customer care, if they wish to switch to Repo Rate.

Increasing education Cost

According to studies, the cost of education is increasing at an average of 15% per annum. The tentative cost of an MBA is up from Rs 2.5 lakh to Rs 20 lakh in 15 years. So if a couple saves Rs 2,000 per month for 15 years, at an average rate of 12%, they will save approximately Rs 9.5 lakh.

Educational Loan: University grant commission

Vidya Lakshmi is a first of its kind portal for students seeking Education Loan. They have developed this portal under the guidance of Department of Financial Services, (Ministry of Finance), Department of Higher Education (Ministry of Human Resource Development) and Indian Banks Association (IBA). NSDL e-Governance Infrastructure Limited has developed and maintaining this portal.

Vidya Lakshmi education loan [student loans in India]

Honourable Union Finance Minister Arun Jaitley in his budget speech for FY 2015-16 said: India is one of the youngest nations in the world with over 54% of the total population below 25 years of age. Our young should develop in both field, education and employable for the jobs of the 21st century. The Prime Minister has explained how Skill India should coordinate with Make in India.

Yet, today less than 5% of our potential workforce gets formal skill training to be employable and stay employable. With a view to enable all poor and middle-class students to pursue higher education of their choice with no constraint of funds, I propose to set up a fully IT based Student Financial Aid Authority to administer and monitor Scholarship as well Educational Loan Schemes, through the Pradhan Mantri Vidya Lakshmi Karyakram. We ensure no student misses out on higher education for lack of funds. We expect the based mechanism under the Pradhan Mantri Vidya Lakshmi Karyakram to provide to students a single window electronic platform for Scholarships and Educational Loans.”

[loan for students in India]

Vidya Lakshmi is a first of its kind portal for students seeking Education Loan. We have developed this portal under the guidance of Department of Financial Services, (Ministry of Finance), Department of Higher Education (Ministry of Education) and Indian Banks Association (IBA). NSDL e-Governance Infrastructure Limited (NSDL) has developed and maintaining the same. Students can view, apply and track their education loan applications to banks anytime, anywhere by accessing the portal. The portal also provides linkages to National Scholarship Portal.

The Salient features of the scheme are as under:

  • The scheme promises loans up to Rs.7.5 lakh for studies in India and up to Rs. 15 lakh for studies abroad.

  • There is no collateral or margin for loans up to Rs. 4 lakh and the interest rate is not to exceed the Prime Lending Rates (PLR). For loans above Rs. 4 lakh the interest rate will not exceed PLR plus 1 percent.

  • The Borrower should repay the loans in 5 to 7 years with provision of grace period of one year after completion of studies

Repayment of an education loan is deductible under section 80E of the Income Tax Act. The yearly limit for deduction is Rs. 40,000 (for both the principal and the interest). The deduction will be available for a maximum of eight years starting from the day you repay.

About NSDL e-Gov

NSDL e-Governance Infrastructure Limited (NSDL e-Gov) was originally setup as a Depository in 1995 and has over the years used its inherent strengths, project management capabilities & technology expertise to deliver state-of-the-art e-Governance solutions which has helped Governments to identify and clear bottlenecks, promote transparency, reduce service delivery costs and deliver public services efficiently. The solutions have efficiently made use of information and communication technologies as a tool for delivering public services and benefits to society at large. Some key e-Governance projects undertaken by NSDL e-Gov are:

  1. Tax Information Network (TIN)
  2. Central Record keeping Agency (CRA) for National Pension System
  3. Electronic Accounting System in Excise & Service Tax (EASIEST)
  4. GST Pilot Project
  5. Registrar for Aaadhar enrolment and eKYC/Authentication Services
  6. National Judicial Reference System

NSDL e-Gov works closely with various Government agencies for designing, managing and implementing e-Governance Projects. Over a period of time, NSDL e-Gov has gained varied experience and expertise in areas that help Governments overcome various challenges faced by them in fulfilling their core responsibilities of delivering public services to the society.

NSDL e-Gov has also established Service Centre network across the country which serve as access points for the public and Governments is using them efficiently to deliver quality services in a user friendly and transparent manner to the citizens. 

Scholarships & Fellowship

Rajiv Gandhi National Fellowship for SC/ST Candidates.

What does a student loan cover?

It covers the basic course fee and other related expenses such as any hostel/ accommodation charges, library, project, exam and other miscellaneous.

Who can apply for the student loan in India?

A student is the main borrower. A parent, spouse or sibling can be the co-applicant in student loan in India.

Whom is the student loan offered to?

They offer it to students who want to study in India or pursue higher education overseas. The maximum amount offered for studies in India and overseas are different and varies from one bank to another.

Types of courses covered under the loan

You can take it for a full-time, part-time or vocational course and graduation or post graduation in the fields of engineering, management, medical, hotel management, architecture, etc.

Education loan eligibility in India

To apply for the loan, one must be an Indian citizen, having secured an admission into a college/university recognised by a competent authority in India or abroad. The applicant must have completed his higher secondary level schooling.

Some banks offer the loan even before one has secured admission into the university.

As per the Reserve Bank of India (RBI) guidelines, there are no restrictions on the upper age limit, but some banks may have it.

Documents required for education loan in India

The banks require additional documents such as admission letter of the institution, fee structure, Class X, XII and graduation (if applicable) mark sheets. Also required are the income documents such as salary slips or income-tax returns (ITR) of the co-applicant.

Loan financing, collateral requirement for education loan

The banks can finance up to 100% of the loan depending on the amount. Currently, for a loan up to Rs 4 lakh, there is no margin money required. For studies in India, Applicant needs to pay 5% of the required loan amount. For studies overseas, the required margin money increases to 15% a loan.

The banks also ask for collateral for loans above Rs 7.5 lakh. Presently, the banks do not ask for any collateral or third-party guarantee for loan up to Rs 4 lakh. For loans above Rs 4 lakh up to Rs 7.5 lakh, Bank/financier need a third-party guarantee. Lenders ask a collateral for a loan exceeding Rs 7.5 lakh.

Once the banks accept loan application, they disburse the amount directly to the college/university as per the fee structure.

Interest rate of student loan

The banks use the Marginal Cost of Funds based Lending Rate (MCLR), plus an additional spread to set an interest rate. Presently (in 2017), the additional spread is in the 1.35-3% range.

Repayment of student loan

The student does repayment of loan as soon as he/she get the employment. The repayment starts as and when the course completes. Some banks even provide a relaxation period of 6 months after securing a job or a year after the completion of studies for repayment. 

The repayment period of education loan is between 5 and 7 years, but financier can grant an extension of loan beyond that as well.

During the course period, the bank charges simple interest rate on the loan. The payment of simple interest during the course period lessens the equated monthly instalment (EMI) burden on the student for future repayments.

Precautions while availing student loan

While applying for a loan, one should also look out for bank charges such as those related to processing, preclosure, late payment of EMIs,. Most lenders charge processing fee of around 0.15 percent of the education loan amount.

Benefits of education loan under Income-tax

Section 80E of the Income Tax Act allows for deduction on the interest paid on the repayment. They allow this deduction only for the individuals paying interest on the loan for himself, spouse or children or for the student to whom you’re a legal guardian.

You can deduct the entire interest amount paid from your taxable income. They allow this deduction for a maximum of 8 years. The principal amount does not qualify for any tax deduction.

Education loan in gujrat

Conclusion: education loans

Taking an education loan helps you in building a good credit score as this is the first loan in a person’s life. So It will create your credit score as soon as you enter your professional life.

If you repay your student loan on time with no defaults, then it also makes easier for you to get home loan, car loan, business loans, etc., in the future.

Get an easy personnel loan by following a discipline in your credit life.

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What is in budget 2021 for taxpayers | Income tax slabs FY 2021-22

Income tax slabs for FY 2021-22

Individual Taxpayers are again disappointed

No Covid tax, surcharges on income tax

” This is indeed a bold growth-oriented budget in terms of Indian economy. Absence of the much-feared Covid Tax/Covid Cess and the surcharges on Income Tax is a great relief. Privatization of 2 nationalised banks and proposal of monetization of assets like land are clear positives. Raising FDI in insurance from 49% to 74% is a great step by the finance minister, which will fuel up Indian financial market. Market response to the budget reflects growth optimism and Indian Stock Market triumphed in happiness. 

What is Income Tax

First of all let us understand what is Income tax is. Indian Income tax system levies tax on individual taxpayers on the basis of a slab system. Slab system means different tax rates are there for different ranges of income. It means the tax rates keep increasing with an increase in the income of the taxpayer. This type of taxation enables progressive and fair tax systems in the country. Such income tax slabs tend to change during every budget.These slab rates are different for different categories of taxpayers. Income tax has classified three categories of “individual “taxpayers such as:

  • Individuals (aged less than of 60 years) including residents and non-residents
  • Resident Senior citizens (60 to 80 years of age)
  • Resident Super senior citizens (aged more than 80 years).

Income tax slabs 2021-2022

Income tax slabs for FY 2021-22

Income tax slabs FY 2021-22.

Current Income Tax Slab FY 2021-22

(Income tax slabs Applicable for All Individuals & HUF)

Rs 0.0 –         Rs 2.5 Lakhs.                        NIL
Rs 2.5 lakhs- Rs 5.00 Lakhs                     5%
Rs. 5.00 lakhs- Rs 7.5 Lakhs                   10%
Rs 7.5 lakhs – Rs 10.00 Lakhs                 15%
Rs 10.00 lakhs – Rs. 12.50 Lakhs           20%
Rs. 12.5 lakhs- Rs. 15.00 Lakhs             25%
Income more than Rs. 15 Lakh               30%

The Finance Minister Nirmala Sitharaman has declared several proposals for the benefit of depositors, investors and taxpayers. Sitharaman said that the tax system should put a minimum burden on the taxpayers. The FM surprised taxpayers by not announcing any change in income tax slab rates. Taxpayers were expecting a big change in income tax slabs. Therefore Finance minister disappointed Individual Taxfillers expecting such changes.

There is a big relief in filing ITR for senior citizens above 75 and NRIs

The Finance Minister proposed that If a senior citizens (above 75) is earning only pension and interest income from deposits then there is no need to file Income Tax Return. The government has proposed to allow tax exemption on maturity of ULIP having annual premium up to Rs 2.5 lakh. However maturity of ULIPs was already  exempted under EEE (Exempted, Exempted, Exempted) for the ULIP policies falling in that category.  Income of EPF (Employees Provident Fund)interest income above Rs 2.5 lakh will be taxable.

EPF : Employees Provident Fund (EPF) is a scheme in which retirement benefits are accumulated. Under the scheme, an employee has to pay a certain contribution towards the scheme and an equal contribution is paid by the employer.

The finance minister also proposed to provide GST relief by reducing inverted GST structures. 

Nirmala Sitharaman had earlier indicated previously to present a “budget like no other”. It was hoped that this year it will be a Budget like no other for taxpayers as well. Everyone was epecting from The finance minister to provide relief to the pandemic-hit common man as well as focus more on driving economic recovery. Experts was already expecting that Budget 2021 could be the starting point for picking up the pieces after the economic destruction caused in year 2020 by COVID-19 pandemic.

The salaried individuals were hoping that the government would broaden some tax advantages through Budget. In the run-up to the Budget presentation, several experts and professional bodies like ICAI, and Expert Panel had recommended the government to increase the deduction limit under Section 80 C of the Income Tax Act,1961. Some even suggested the government to allow higher deduction under Section 80D and increase the deposit limit in PPF (Public Provident Fund) to Rs 3 lakh. 

PPF: Public Provident Fund scheme is one of the most popular long-term saving-cum-investment products, mainly due to its combination of safety, returns and tax savings. The PPF was first offered to the public in the year 1968 by the Finance Ministry’s National Savings Institute.

Dividend payment to REIT/InvIT are exempted from TDS

Dividend payment to REIT/InvIT are exempted from TDS, FM Sitharaman announced in Budget speech.

With effect from April 1, 2020 there will be a drastic change of Taxes for REITs and InvITs. In India these alternate investment vehicles has raised more than Rupees 250 billion of capital. Until now Indian Companies are need to DDT and shareholders (except non-corporate residents) were exempt. In case of business trusts, dividends used to be exempt at each level. However the government has did not announce any specific relief to such trusts in Buget proposals.

If the SPV has opted to be taxed at the concessional corporate tax rate of 22% (against the general rates of 25%/30%), the dividends declared by the SPV will be taxable in the hands of the unitholders and the business trust would be required to withhold tax at the rate of 10% when distributing income representing dividends received from SPVs.

Get more

Read this for more details of SPV Taxation

Budget 2021

Top 5 takeaways for taxpayers from Budget 2021

1. No tax burden on senior citizens above 75

2. Tax assessment can be re-opened only up to 3 years

3. Dispute Resolution Committee for small taxpayers

4. Additional deduction of Rs 1.5 lakh for purchasing affordable house.

5. Relief from double taxation for NRIs

Income Tax on Gifts/Presents 

Gifts or Presents for an amount up to Rs 50,000 are completely tax free. If upper limit of Rs 50000 of exemption is breached, the whole amount of gifts become taxable. However, gifts/presents/offering/Streedhan(hindi) which an individual receive from relatives are exempt from tax by virtue of Section 56 of the Income Tax Act. According to the IT Act 1961,

These undermentioned persons qualifies as relative.

  • Spouse
  • Brother or Sister
  • Brother/ Sister of the spouse
  • Brother or sister of either of the parents
  • Any lineal ascendant or descendent
  • Any lineal ascendant or descendent of the spouse.
  • Apouse of the persons referred above.

Friends do not come under ‘relative’ and any gifts which an individual receive from them are taxable. Further, gifts received at the time of marriage (Stridhan) are exempt from tax.

But, gifts on occasions like birthday, anniversary, etc. of an individual will be charged to tax as per above mentioned limits and will be clubbed in income as per tax slab.

Budget 2021: Buyers of affordable houses will get more time to avail additional tax benefits

According to Budget 2021; By buying an affordable house, a taxpayer may avail tax benefits up to Rs 3.5 lakh on interest paid on home loan taken to buy such a house.

Budget 2021-22: This is time to give a boost to the buyers of affordable houses. Therefore Finance Minister decided to extend the time period of taking loans to buy such houses by one year – i.e. from March 31, 2021 to March 31, 2022 – to avail additional tax benefits of Rs 1.5 lakh under section 80EEA of the Income Tax Act.

Section 80EEA on affordable housing loan

Section 80EEA of Income Tax,1961 provides tax benefits up to Rs 1.5 lakh on the interest paid on loans taken for Residential House Property for affordable housing. The benefit is over and above the tax benefit of Rs 2 lakh available under section 24(B) of the Income Tax Act on interest on Housing Loan on both self-occupied and rented properties.

So, by buying an affordable house, a taxpayer may avail tax benefits up to Rs 3.5 lakh on interest paid on home loan taken to buy such a house.

The Maximum deduction allowed under this section is Rs 1,50,000 or interest payable on the home loan, whichever is less and following condition should be satisfied to claim deduction under section 80EEA of Income Tax Act. Following are the conditions of such loan.

1. Loan availed for acquisition of Residential Property.

2. Loan has been sanction during the financial year 2019-20, 2020-21 or 2021-22.

3. The Value of house property does not exceed Rs 45 lacs.

4. The assessee does not own any residential house property on the date of sanction of loan.

Affordable Housing

Conditions mentioned in last year’s Finance Bill with respect to the carpet area of the house property in real estate projects approved on or after September 1, 2019 are as follows:

To be qualified as an affordable house, the carpet area of the house property should not exceed 60 square meter (645 sq ft) in metropolitan cities of Bengaluru, Chennai, Delhi National Capital Region (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad,Greater Faridabad), Hyderabad, Kolkata and Mumbai (whole of Mumbai Metropolitan Region).

In other cities and towns, the carpet area should not exceed 90 square meter (968 sq ft).

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