Education Loan for NRIs: FBAR, Tax Filing and What to Check Before Borrowing

Education Loan for NRIs: FBAR, Tax Filing and What to Check Before Borrowing

Families living abroad often assume an education loan for NRIs works like any Indian education loan, with a few extra forms. The loan itself is mostly straightforward. The surprises come from two other places: tax rules in India that depend on residential status, and a United States reporting rule called the FBAR that applies to some families but not to others.

Non-resident Indian (NRI) is an everyday term, but tax law does not use it the way families do. Whether a family with an education loan for NRIs has to file anything, in India or the United States, turns on precise tests. Here are the tests that decide, what the official pages say, and what is left for a tax professional to confirm.

Who counts as an NRI for tax purposes?

Tax law looks at days spent in India, not at a passport or an address, so an education loan for NRIs starts with a residency check. The Income Tax Department's guidance for this assessment year explains that an individual is a resident in a year if they are in India for 182 days or more, or for 60 days or more in the year and 365 days or more over the four years before it. Anyone who fails both tests is a non-resident for that year.

The same guidance softens this for Indian citizens and people of Indian origin who visit India: the 60-day condition becomes 182 days, or 120 days if their total income other than from foreign sources is above ₹15 lakh. A separate rule treats an Indian citizen with India income above ₹15 lakh as a resident if they are not liable to tax in any other country.

On forms, the department's page for non-resident individuals says the income tax return form ITR-2 applies to individuals with income under any head other than business or profession, and ITR-3 applies where there is salary, house property, business or profession, capital gains or other income that does not fit the simpler forms. Whether a return is mandatory depends on the income taxable in India, and the page itself says it is only a general overview. Residential status is the first test any family weighing an education loan for NRIs should settle.

Can an NRI family take an education loan in India?

Students and parents often ask first whether an education loan for NRIs exists at all. The answer depends on who the borrower is and on the lender's own policy.

Lenders write their own rules, and the terms of an education loan for NRIs differ from one bank to another. Questions to settle in writing include whether the student can be the borrower while parents abroad act as co-applicants, which income documents the lender accepts from abroad, and whether a property in India is needed as security.

The Indian Banks' Association (IBA) model scheme, which is published on Canara Bank's website, says the student should be an Indian national and adds that NRI students holding a valid Indian passport are covered. The page sets no rule for a non-resident co-applicant, so ask the lender how it treats one.

What does an education loan for NRIs cost?

Cost is the first number families compare, and the pricing of an education loan for NRIs is rarely a separate product from the lender's regular student loans.

State Bank of India (SBI) lists its Student Loan on its education loan rate card at 10.15 percent without collateral for loans up to ₹7.5 lakh and 9.65 percent with collateral above that, and its Global Ed-Vantage scheme at 9.65 percent, with a 0.50 percent concession for girl students. The card lists rates by scheme and by collateral, with no separate line for borrowers living abroad.

Rates float with the lender's benchmark, so any figure can change after sanction. For a family earning abroad, the more useful questions are how instalments will be paid from overseas and what the exchange rate does to the cost of each one. As an illustration at a planning rate of ₹90 per dollar, which is not a live rate, a ₹50,000 instalment is about $556. If the rupee strengthened to ₹85 per dollar, the same instalment would be about $588.

How does an education loan for NRIs interact with the tax deduction?

Interest on an education loan can reduce taxable income, but the rules have a specific shape.

Section 129 of the Income-tax Act, 2025, which replaced Section 80E, allows an individual a deduction for interest paid during the tax year on a loan from a financial institution or approved charitable institution, taken to pursue higher education of the individual or a relative. The deduction runs for the initial tax year and the seven years immediately after it, or until the interest is fully paid, whichever is earlier.

Three details in the text matter for families abroad. First, the payment must be made out of the person's income chargeable to tax. Second, a relative means the spouse and children, or a student for whom the person is the legal guardian. Third, the section speaks of an individual and does not exclude non-residents.

Put together, for a family with an education loan for NRIs, a parent who has no income taxable in India may have nothing to set the deduction against, and who is entitled to claim it is a question for a tax professional. Only the interest counts, not the principal repaid.

Lenders also warn about the choice of tax regime. A disclaimer on Credila's education loan page says the deduction under Section 129 is available only under the old tax regime and not if the taxpayer opts for the new one. That is the lender's description, so check the regime rules before choosing.

What is the FBAR and who has to file it?

The FBAR is the Report of Foreign Bank and Financial Accounts, filed on FinCEN Form 114. FinCEN is the Financial Crimes Enforcement Network, part of the United States Treasury. The rule has nothing to do with Indian tax, even when an education loan for NRIs is involved. It concerns United States reporting, and it applies to a person's status in the United States rather than to being an NRI.

According to the Internal Revenue Service (IRS) page on the FBAR, a U.S. person, which includes citizens and residents, must file if they have a financial interest in, or signature or other authority over, financial accounts outside the United States and the combined value of those accounts exceeded $10,000 at any time in the calendar year. It describes the accounts as items such as bank accounts, brokerage accounts and mutual funds.

An NRI who is not a U.S. person has no FBAR duty. A parent working in the United States on a visa may or may not be treated as a U.S. person. That decision belongs to the IRS definitions and a U.S. tax professional, and it should not be assumed from the visa type.

When is the FBAR due, and what happens if it is missed?

The same IRS page says the FBAR is due on April 15 following the calendar year being reported. There is an automatic extension to October 15, and no request is needed. The report must be filed electronically through FinCEN's BSA E-Filing System. FinCEN's page on the report repeats the $10,000 threshold and explains that individuals can file without registering for an account.

An Indian savings account is generally an account outside the United States. For a U.S. person with such an account, whether alone or jointly with parents or with signing authority, it counts toward the $10,000 total. The IRS says late or missing filings can lead to civil and criminal penalties, depending on the facts.

Whether a loan account itself needs to be reported is not answered on those pages, which are written around accounts that hold money. A U.S. tax professional can say how the family's loan, savings and any joint accounts should be treated. The IRS also lists the Form 8938 as a related report under the foreign account tax compliance law, and families should ask whether it applies to them as well.

Which rule applies to whom?

What mistakes should NRI families avoid?

Some errors repeat across families:

• Treating an education loan for NRIs as a purely Indian matter, when United States rules may also apply
• Assuming an NRI is always a non-resident for tax, when the days spent in India decide it
• Treating the FBAR as an Indian tax return, when it is a United States report
• Assuming that being an NRI means no FBAR duty, when U.S. person status is the test
• Claiming the interest deduction without checking whose income pays the instalments
• Choosing a tax regime without checking how it affects the deduction

Records help with an education loan for NRIs in every one of these cases: a note of days spent in India each year, the account list and the interest certificate from the lender.

Questions about an education loan for NRIs

Can an NRI student get an education loan in India?

The IBA model scheme on Canara Bank's site covers NRI students who hold a valid Indian passport, and each lender applies its own policy beyond that for an education loan for NRIs.

Is the interest on an education loan for NRIs deductible?

Section 129 allows an individual to deduct interest paid out of income chargeable to tax, for up to eight years, and the same rule governs an education loan for NRIs. Whether an NRI parent can use it depends on that parent's Indian income and tax regime.

Do all NRIs need to file an FBAR?

No. The IRS page ties the duty to U.S. person status and to foreign accounts above $10,000 at any time in the year.

Where can families check the details?

For an education loan for NRIs, the Income Tax Department, the IRS and FinCEN pages are the starting point, and a tax professional can apply them to the family's facts.

FundMyCampus is an education loan advisory platform founded by an alumnus of the Indian Institute of Management Bangalore. It is not a bank, and its website says it does not charge students any fee. It offers free tools, including an equated monthly instalment (EMI) calculator, an eligibility checker and a loan comparison tool, and works with more than 12 banking partners.

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