Remittance Fee on Education Loan

There are a few charges you need to bear to ensure the smooth transfer of funds from India to abroad. People often refer to them as hidden charges. One such charge, less talked about, is the remittance fee, particularly pertinent in the context of an education loan. While not exorbitant, it is still essential for you to be aware of this fee. In this blog, you will gain comprehensive insights into the remittance fee associated with education loans.

What is a Remittance Fee?

In a general context, remittance signifies the movement of money from one country to another, commonly abroad, upon receiving a bill or invoice. In the realm of education loans, when transferring funds for tuition fees or living expenses from India to your destination country, a remittance fee is applicable. This fee is imposed on various cross-border transactions, contributing significantly to a country's economy and aiding individuals in lower-income nations. Remittance plays a crucial role in poverty alleviation, making it an essential element in economic development.

Remittance fees on education loans are imposed by banks or financial institutions from whom you have taken an education loan, for international money transfer, depending on the remitted amount. It's crucial to confirm these charges with the respective bank beforehand to ensure transparency and make informed decisions.

Why Remittance Fee is Charged?

Education loan remittance fees are charged to cover the costs incurred by a bank or financial institution when transferring funds from one country to another for education purposes. These fees help support the operational and administrative aspects associated with ensuring safe and efficient international transfers related to education loans. The fees help maintain the infrastructure and services needed for smooth cross-border transactions in the education finance process.

How Much is Remittance Fee on Education Loan?

There is a scheme known as the Liberalised Remittance Scheme (LRS) that enables parents to send money to their children for various expenses incurred in a foreign country. A maximum limit of $250,000 has been established for such transfers. Under this scheme, there is no remittance charge if a parent or any other person transfers an amount below Rs 700,000. However, if the amount exceeds this threshold of Rs 700,000, a remittance charge of 0.5% is charged. These charges are applicable only if the money is transferred through a financial institution regulated and licensed by the RBI.
 

Conversely, if the amount is not received from an RBI-regulated financial institution and is paid directly from personal funds, a charge of 5% will be levied on amounts exceeding Rs 7 lakh. To illustrate, suppose you send 9 shortcomings of your personal savings, exceeding the LRS limit by 2 lacha. In this case, you will have to pay transfer fees of 5% by going up to 10,000 Invr. If the transfer was through an education loan, the remittance fee would be 0.5%, resulting in only 1,000 INR.

Expenses Included in Remittance Fee on Education Loan?

Initially, there was considerable confusion about the expenses included in the remittance fee for education loans. Recently, the Finance Ministry of India clarified that starting from June 30, 2023, the following items will be incorporated in the remittance fee for education loans -

• 
  Purchase of airplane tickets for the person undertaking studies abroad, facilitating travel between India and the target country.
• 
  Tuition fees and any other fees associated with studying abroad.
• 
  Daily living expenses, covering costs for food, accommodation, transportation, health services, and more.

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  Cheapest Education Loan Option in India
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  Foreign Education Loan

Now that you understand how and why the remittance fee is applied to money transfers between India and abroad, you can plan your application for disbursement of education loan accordingly. One of the most important points is that when using personal funds, you only pay 0.5 % of the transfer of money when choosing a training loan for 5 %. This emphasizes significant savings that can be achieved using a training loan. Plus, you don't have to navigate the student loan market. Securing one is as simple as checking your eligibility through GyanDhan. Once you've done that, you can sit back and relax, as we take care of all the other details for you and make sure to inform you about everything and do not keep any hidden charges.

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