I have repaid rs 34000/- towards my educational loan so far in this
year. How can I calculate the interest which is paid so that I can use
that for tax rebate? When I asked the bank to provide me the tax
certificate, they simply added the interest charged to my account so
far in the year!! But this is the incorrect amount to be used for
rebate as that is for the interest paid and not the interest charged.
Can somebody suggest how is the interest calculated from the repayment?
I'd bet the bank applies the $34K you paid toward interest. So unless your
interest charged is greater than $34K (and if it is, I don't want to know
what your student loan balance is), deduct the amount they said they
charged, on the theoretical reality that you already paid it.
Are there normal (read that "not interest only") which don't amortize
like normal loans? Even a 30 yr mortgage has some portion of the
payments going to principal. How can a bank apply toward interest which
hasn't accrued yet?
I'm not sure where you're headed. The OP stated "they simply added the
interest charged to my account so far in the year" and that he paid about
$34,000 toward the loan. Most lenders apply the payment to the interest
FIRST, then toward the principal, so unless they tell him the accrued
interest (ie: "charged to my account") was more than the $34,000, then all
the accrued interest was paid - and most likely that amount is less than the
It's possible that there remains some accrued (ie: charged to his account)
interest that hasn't been paid as of year-end, ie: accrued in December but
paid in January. Depending on the frequency of his payments and the
remaining balance, this amount may be insignificant, but it could also be
rather large. The very long run is, that he'll never pay more in interest
than gets accrued.
Each month on my mortgage, as with all normal mortgages, the payment
(whatever amount that ends up being) goes to the accrued interest first,
with the remainder going toward the principal balance. The accrued interest
for December is being paid with the January payment. At least that amount
of "accrued" interest remained unpaid as of December 31st.
If my January payment is $2000, of which $1500 would be applied to accrued
interest and $500 toward principal, a payment of $3000 would result in $1500
going toward accrued interest (that number can't change) and $1500 going
toward the loan balance.
The only people who will know the disbursement dates from the loan and the
payment received dates from the lender and the interest rates charged and
the interest rules **meaning the lender** are the only ones who will be able
to compute the interest paid by the borrower. They should be sending a
statement on student loan interest by the end of January. I suspect it'll
not be different from the number he's getting from them now. And of course,
he'll never know if it's right or wrong, it'll be the number that gets used.
This whole discussion could be moot:
The student loan interest deduction (actually an adjustment to income) is
capped at $2,500.
Anyone who can afford to pay off $34,000 in one year probably exceeds the
$80K/$160K AGI cap.
Don Priebe wrote on 1/12/2009 2:57 PM:
The "rs 34000/-" and email address (rahuljodhwani.pune) tells me that
this poster is probably from India and "rs" refers to the Indian
currency Rupees aka INR. That is not USD
I am afraid I am not familiar with Indian tax laws enough to answer
the original questions, though
-- Shankar Prasad
You will need the following information:
1) Loan balance at beginning of year
2) Loan balance at end of year
3) Total of all payments made during year
Subtract 2) from 1). That is the amount of loan principal paid during
Subtract this number from 3). The result is the amount of INTEREST you
paid during the year.