ITR for Overseas Education loan: Requirements, Documents, Filing & More

Pursuing higher education abroad is an exciting opportunity that opens doors to world-class education & global exposure. With universities offering diverse programs across various fields, many Indian students are now choosing to pursue their higher studies at international universities in the USA, the UK, Canada, Australia, New Zealand, and other preferred European & Asian countries. As the cost to study and living is usually higher compared to their native countries, students often rely on overseas education loans to finance their education abroad.

A study abroad loan covers all the major expenses, including tuition fees, living expenses, accommodation, travel and other related costs. However, knowing everything about the overseas education loan process and its key aspects is essential for a successful loan sanction and disbursement.

One crucial factor in the process of availing an overseas education loan is filing an Income Tax Return (ITR) document, which serves as proof of income and financial responsibility. So, in this blog today, we will walk you through the ITR requirements for overseas education loans, their significance, and how you can ensure that your financial documents are in order.

Let's begin by understanding the ITR!

What is an Income Tax Return (ITR)?

An Income Tax Return (ITR) is primarily used to file details about one’s income and the applicable tax return with the Income Tax Department of India. It is mandatory for self-employed and salaried individuals to file income tax returns as it helps the financial lender assess the income earned and incurred expenditure for that specific financial year.

There are seven types of Income Tax Returns, of which four are applicable for the salaried and self-employed individuals. Moving ahead, let us learn about these four types of ITR that can be relevant to overseas education loan applicants and co-applicants.

What are the Types of Income Tax Returns (ITR)?

ITR for education loan is divided into four types, and it’s necessary to understand all types to effectively avail an overseas education loan.

Let’s understand the different types.

ITR -1: This type of ITR applies to resident individuals with a total income of up to INR 50 Lakhs. The income can be from salaries, one house property, other sources (interest etc.), & agricultural income up to INR 5000.
ITR -2: This type of ITR applies to individuals who do not have income from profits and gains in business or profession.
ITR -3: For individuals with income from profits and gains in business or profession.
ITR -4: For the presumptive income from Business & Profession.

Now that we have discussed about the various types of ITR, let’s understand the importance of ITR in an overseas education loan process.

What is the Significance of ITR for Overseas Education Loan?

The financial lenders including private banks, government banks, NBFCs and international lenders consider the ITR to ascertain the repayment capability of the applicant or the co-applicant. The tax returns provide an in-depth information regarding the stability of an applicant's or co-applicant's finances and their level of income on a yearly basis.

Now it’s time to look at the minimum requirement of ITR for education loan for various study abroad destinations.

What is the Minimum ITR Requirement for Overseas Education Loan?

In this section, we have mentioned the country-wise bifurcation of the required ITR at different study abroad destinations:

Country	Minimum Required ITR for UG Program	Minimum Required ITR for PG Program
USA	INR 10–12 Lakhs	INR 5-10 Lakhs
UK	No specific requirement	No specific requirement
Australia	INR 12-15 Lakhs (In certain cases, an ITR below 12 Lakhs may be accepted, depending on the student's profile & the university's requirements)	INR 12-15 Lakhs (In certain cases, an ITR below 12 Lakhs may be accepted, depending on the student's profile & the university's requirements)
New Zealand	INR 10-12 Lakhs	INR 10-12 Lakhs
Canada	For Bachelor’s Degree: INR 10-15 Lakhs For UG Diploma: INR 5-6 Lakhs	For Master’s Degree: INR 10 Lakhs For PG Diploma: INR 5-6 Lakhs

Moving on to the next section, we will look at the implications of ITR on education loan interest rates.

What are the Implications of ITR on the Overseas Education Loan Interest Rates?

Filing your ITR allows you to claim a deduction on the education loan interest rate of a study abroad education loan under Section 80E. This deduction helps reduce your taxable income and lowers your tax liability for that specific financial year.

Moving on, we will look at the required documentation to file the ITR for education loan.

What are the Documents Required to file an ITR for Overseas Education Loan?

The documentation for an overseas education loan which includes an ITR carries more weightage than an education loan application without an ITR as it results in increasing the chances of the loan approval.

Here is the list of documents that you will be required to submit while filing an ITR for study abroad loan:

Pan Card, Aadhaar Card
Form 16
Interest Certificate from Education Loan Lender
Previous Year’s ITR

Now that we have learned about the required documents to be submitted let us look at the steps involved in filing the ITR return.

7-Step Process to File an ITR for an Abroad Education Loan

Knowing the process to file the ITR return will come handy and save time. So, in this section, we will go through the step-by-step process to file for an IT return for an abroad education loan.

Read on:

Step 1	Determine your Eligibility for ITR	Before filing your ITR, it’s important to confirm that you are eligible for the tax benefits on education loans under Section 80E of the Income Tax Act for the interest paid on your education loan. This benefit is available if the loan is taken from a recognized financial institution for higher education purposes.
Step 2	Gather the required documents to file for ITR	Having all documents in place before filing the ITR can help streamline the process.
Step 3	Visit the official Income Tax e-filling website (https://eportal.incometax.gov.in/iec/foservices/#/login ) & click on ‘Login.’	Once you click on the ‘Login’ button, you will be prompted to enter your User ID which is usually your PAN number and password. If you do not have an account, you will be first required to create one by registering on the website.
Step 4	Go to the ‘File Income Tax Return’ & select The Right ‘Assessment Year’	After logging in, navigate to ‘File Income Tax Return’ section on the dashboard. Here, you will need to select the correct assessment year for which you are filing the return. The assessment year is the year following the financial year in which the income was earned.
Step 5	Select the Status & ITR type	Next, you will be prompted to choose your filing status. For individuals taking education loans, this is usually ‘Individual.’ You will also need to choose the correct ITR form, depending on your sources of income.
Step 6	Choose the Reason for Filing ITR	At this stage, you will need to specify the reason for filing your ITR.
Step 7	Recheck Pre-filled Information and submit	Before submitting your ITR, the portal will display pre-filled information such as your personal details, income details, and deductions. Carefully review this information for any discrepancies. If everything looks correct, then digitally sign the form and proceed to submit your ITR.

If you are applying for the fall intake (usually beginning in August or September), it is ideal to file your ITR between May and June of the financial year. On the other hand, if you are applying for the spring intake (starting in January), it is recommended to file your ITR between May and September.

Now that you are familiar with the complete process of filing your ITR for education loan, let us learn how to avoid common mistakes while filing an ITR.

How to avoid ITR Filing Errors for Quick Overseas Education Loan Approval?

As we have understood, submitting an Income Tax Return (ITR) is essential to ensure smooth overseas education loan approval. Errors in your ITR can not only delay the approval but even raise concerns with financial institutions.

Mentioned below are the mistakes to avoid while filing an ITR for education loan:

Incorrect Personal Information: Check and re-check the personal information to ensure accuracy. The name on the ITR should match as per the PAN Card and Aadhar Card.
Choosing the Wrong ITR form: Select the correct ITR form based on your income type and sources of income.
Failing to Report all Income Sources: It is necessary to include income from all courses, including salary, freelance work, investments etc.
Not Attaching the Requisite Forms/Documents: Ensure to submit all the necessary documents and forms while filing the ITR return.
Late Filing of Returns: Ensure you file your ITR return on time to avoid penalties or delays.

By avoiding these common ITR filing errors, you can significantly improve your chances of a smooth and quick overseas education loan approval.

Getting your ITR right is a key to securing an education loan without any setbacks. Financial lenders usually appreciate a well-organized financial profile that can greatly improve your chances of overseas education loan approval.

If you need assistance with filing your ITR or understanding your education loan eligibility, our Élan Loan Experts are here to help! Our team can guide you through the entire process, from ITR filing to assessing your loan eligibility.

Visit our website & book a free counselling session today!