One of the main steps in preparing to study in India or abroad is to arrange finances (through a loan for education). During the entire loan application process, there is one common question that parents and students evidence.: “Is a PAN Card required?”
A PAN (Permanent Account Number) card is more than an ID proof. It is a financial identity to help lenders track the credit history, check income, and comply with taxation. Many banks and NBFCs could insist on a PAN card. However, it may depend on whether you are student, co-applicant, or a guarantor it requires one.
For example, dependent students under 18 may not have a PAN card. For these cases, lenders usually consider the parent/guardian’s PAN during the processing of the education loan. In general, if the student has a PAN card, the education loan will be processed quicker, with less verification time and more likelihood of an approved loan.
In this blog, we’ll clarify whether a PAN card is truly mandatory for an education loan, when it is required, exceptions to the rule, and what alternative documents you can use if you don’t have one. By the end, you’ll have a clear picture of how PAN card requirements affect your education loan journey.
Why PAN Card Mandatory for Education Loans?
When you apply for an education loan, you will likely have to submit a Permanent Account Number (PAN) card to the bank or NBFC, as a student, co-applicant (usually a parent/guardian) or both. This isn’t merely a formality; they are mandated to obtain this information by RBI and banking regulations to promote transparency in banking transactions.
RBI and Banking Guidelines
- Financial Identity Proof: The PAN card is one of the critical documents to establish the applicant’s financial identity, under the RBI’s KYC (Know Your Customer) guidelines. By requiring a PAN card, the lender will establish that the student and/or co-applicant is an actual and legitimate borrower.
- Tax Compliance: Since education loans provide benefits under the Section 80E of Income Tax Act, banks need PAN details to record on any documents that can be applicable to tax. A PAN card is also required to claim any benefits.
- Credit History Tracking: The PAN is directly linked to credit scores in India. Banks utilize it to track repayment capacity of the co-applicants, and also determine eligibility for a loan.
Difference Between Requirement for Students and Co-applicants
For Students:
- If the student is below 18, the PAN card is usually not required, and the bank will simply rely on the parent’s (or guardian’s) PAN card.
- If the student is 18 years or above, banks may require the student’s PAN card for loan documentation, especially for study abroad loans. Having one improves processing speed.
For Co-applicants (Parents/Guardians):
- A PAN card is usually needed in almost all cases for co-applicants. As parents or guardians are often financial support and income providers, their PAN card is needed to proof income tax returns, salery slips, and financial credibility.
- Even if the student has a PAN, banks will still insist on the co-applicant’s PAN as a part of standard loan processing.
Cases Where PAN Card is Not Compulsory
Although having a PAN card is typically required for education loans, it may not be required in certain cases, depending on the type of education loan, the applicant profile, or the bank guidelines. Some cases where a PAN may not be required under certain loan circumstances, include:
Minor Applicants (Students Under 18)
- Students under 18 years of age may not have a PAN card yet.
- So if a minor is applying, the bank would generally ask for the PAN card of the parent/guardian or co-applicant in place of the student’s PAN.
Smaller Loan Amounts
For education loans at or under ₹4 lakhs, some banks (but not all) can process the loan application without insisting on the student having the PAN card. However, the co-applicant (usually a parent or guardian) will need to provide their PAN card.
No Taxable Income Applicants
- If the student is not earning or has no taxable income, some banks (but not all), will allow processing of the loan by not requiring the student have PAN card.
- In these cases, it does shift the income types and PAN requirement onto the co-applicant.
Foreign Nationals or NRIs (special cases)
- For foreign nationals studying in India or generally Indian students applying for education loans with co-applicants who are NRIs, the bank may consider the NRI’s proof of identity like the NRI student’s passport or OCI/PIO cards instead of requiring the student to have a PAN card.
- For most NRI cases, the co-applicant who is an Indian citizen will need a PAN card typically.
Alternative Verification Accepted by Banks
- If a applicant is not able to provide the PAN immediately a bank may with reservations, accept Aadhaar, Passport or Voter ID as alternative verification until PAN is provided.
FAQs: Is PAN Card Mandatory for Education Loan
Q. Is PAN card mandatory for taking an education loan?
A. PAN card is essential for the student and also for the co-applicant. It is utilized to validate the identity of the student and the co-applicant, fulfil KYC norms, and also for disbursal of the loan amount as per guidelines of the Reserve bank of India and banks.
Q. Do students below 18 years need a PAN card for an education loan?
A. The bank will accept the parent or guardian’s (co-applicant) PAN card if the student is a minor and does not possess a PAN or fall into the tax bracket for an assessment year.
Q. Can an education loan be approved without the student’s PAN card?
A. For loans of smaller amounts (Typically, up to ₹4 lakhs) or if the student is not taxable, banks offer this leniency; however, the PAN card of the co-applicant would still be required.
Q. Why is PAN card important for education loans?
A. PAN card allows banks and lending institutions to follow financial transactions and assure payment of income tax obligations. The PAN card also helps to prevent educational loans from going abuse at a bank. If you are applying for an interest subsidy, or inquiring about an income tax deduction under Section 80E, a PAN card is a requirement.
Q. Is PAN card required for co-applicants in education loans?
A. The co-applicant (parent/guardian/spouse) must submit their PAN card, as they are legally responsible to pay back the loan once the student begins earning.
Q. What if I don’t have a PAN card when applying for an education loan?
A. Some banks will require the PAN before the loan is disbursed; in this case, you may be able to apply for the loan using an alternative means of identification such as an Aadhaar or Passport. However, it is recommended that you apply for a PAN card as soon as possible.
Q. Do NRIs need a PAN card for education loans in India?
A. If the co-applicant is an NRI, banks will consider other documents such as passports, OCI/PIO cards. A PAN card is still required if the co-applicant is an Indian citizen.
Q. Can I claim tax benefits on education loan interest without PAN card?
A. To claim benefits under section 80E, the borrower or co-borrower needs to have a valid PAN card as it is used in income tax returns.