ITR requirement for education loans might be an essential eligibility criterion. Usually, self-employed applicants are required to submit an ITR for the last 2 or 3 years. Securing an education loan often requires meeting specific criteria, and one of the most significant is the Income Tax Return (ITR) requirement. Check the detailed breakdown of the ITR requirement for education loans for students seeking to fund their international studies.
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What is ITR?
Income Tax Return (ITR) is a form used to report an individual’s annual income, taxes paid, and any deductions claimed to the Income Tax Department of India. Filing an ITR is mandatory for individuals earning above a certain threshold, and it helps assess tax liability or refund eligibility. The ITR form includes salary, business income, and investments, and must be submitted annually to comply with Indian tax laws. It serves as proof of income for individuals and is essential for various financial transactions, including securing loans.
Also Read: Studying abroad with an education loan? Check here all about income tax rebate on education loan.
Why Do Banks and Lenders Ask for ITR?
ITR helps banks evaluate the financial condition of the loan applicant or their co-applicant (parents or guardians). It provides a clear picture of their income sources and tax obligations, proving their ability to repay the loan. Check more details below:
- Banks use ITR to confirm that the applicant or co-applicant has a stable income.
- For education loans, this is very important as it reassures the lender that there will be enough financial backing to repay the loan.
- The ITR is a major document used to check the creditworthiness of the loan applicant. A well-maintained ITR for the past 2-3 years shows responsible financial behaviour.
ITR Requirement for Education Loans
In the case of students seeking education loans to study abroad, most lenders have specific ITR requirements, especially when the loan is collateral-free or large in amount. If you are salaried then the bank may not ask for ITR. However, if you are a self-employed person, then the bank will make it mandatory for you to submit recent ITRs. Check major details about ITR requirements below.
Who Needs to Submit ITR?
Usually, the co-applicant (parent or guardian) is required to submit their ITR as proof of income, as most students are not yet earning. The co-applicant’s financial background plays a key role in loan approval. However, if the student is already working and earning, they will need to submit their ITR to strengthen the application. Most banks and Non-Banking Financial Companies (NBFCs) in India ask for the ITR of the last 2 to 3 years. This helps the lender assess the financial history and consistency in income.
Minimum Income Criteria
While there’s no strict rule for minimum income, the ITR documents help the bank understand whether the income of the co-applicant is sufficient to cover loan EMIs after the moratorium period.
Also Read: Do you want to know about the terms associated with the transfer of money in a foreign market? Check this blog on What is Remittance: Types, Modes & Tax Deduction.
ITR Requirement for Different Types of Education Loans
There are majorly two major types of education loans i.e. secured and unsecured education loans. In both types of loans, the eligibility criteria are different and the amount also varies. Check the requirement of ITR in types of education loans below:
Collateral-Based Education Loan
For loans that are secured by collateral (property, fixed deposits, etc.), the ITR requirement may be slightly more flexible. However, submitting an ITR is still essential to prove income stability and repayment ability. The bank will determine the maximum loan amount based on the income that will be reflected in the ITR.
Collateral-Free Education Loan
For collateral-free loans (up to INR 7.5 lakhs, as per government norms), the ITR becomes one of the most important documents. Since there is no asset to secure the loan, the lender heavily relies on the financial credentials of the co-applicant, and a well-maintained ITR is often mandatory.
Can You Get an Education Loan Without ITR?
Many students worry if their parents or co-applicants do not file ITRs due to having lower income or being exempt from taxes. This is not a major problem as there are a lot of banks and NBFCs that provide education loans without ITR. Check some quick and easy solutions below:
- Some private NBFCs or financial institutions may offer education loans with minimal ITR requirements, but they often compensate by charging higher interest rates or asking for stricter collateral terms.
- There are government-backed schemes like the Vidya Lakshmi portal, where students may not need to submit extensive financial documentation like ITRs, provided they meet other criteria.
- In cases where the ITR is not available, lenders may accept alternative documents such as salary slips, Form 16, or income certificates issued by local authorities.
The ITR requirement is a major part of the education loan process for Indian students planning to study abroad. It serves as a measure of financial stability and repayment capability for the lender. Check some common FAQs below:
FAQs
Yes, most banks require the co-applicants ITR (Income Tax Return) for the past 2-3 years to assess their financial stability. It helps the lender gauge the repayment capacity.
The co-applicant, usually a parent or guardian, must submit their ITR to the bank. The student, if earning, may also need to provide their ITR.
Some banks and NBFCs offer education loans without an ITR, but these options may have stricter conditions or higher interest rates. Proof of income or collateral may be required.
Banks ask for the ITR of the last 2-3 financial years from the co-applicant to ensure a steady income source for loan repayment.
If the co-applicant has not filed an ITR, it might be challenging to secure a loan. However, some lenders may consider alternative proof of income or request collateral as security.
To know more about education loans, the best bank accounts for students, forex and banking experience for global students or international money transfers, reach out to our experts at 1800572126 to help ease your study abroad experience.
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