Education Loan Repayment Income Tax Benefits

In today’s times, the increasing cost of higher education in India is costing an arm and a leg and becoming a wearisome obstacle for many potential college students and their families. This is where education loans in India come into play. Education loans play a vital role in enabling students to achieve their academic goals by providing the necessary financial resources to cover tuition fees and associated costs. Education loans not only facilitate access to higher education but also alleviate financial burdens, allowing students to focus on their studies and achieve academic excellence. Under Section 80E of Income Tax Act, which comprises education loan deduction, the loan bearer can claim an education loan deduction. Explore the blog and learn more about section 80E of Income Tax Act, education loans in India, their eligibility criteria, education loan repayment options and more. 

Recommended read: How to get an education loan to study abroad in India

• Importance of education loans

Education loans alleviate financial constraints and empower students to explore diverse career paths, focus on their studies, and succeed academically. 

• Financial support

Education loans unlock the possibility for numerous students to pursue higher education, especially those from lower-income backgrounds. Also, some banks provide easy education loan interest rates.   

• Long-term financial benefits

Education loans in India serve as an investment in one’s future, facilitating long-term economic stability. Besides, it also elevates financial constraints on the family. 

• Encouraging financial responsibility

While education loans in India provide funding for education, they also instill a sense of financial responsibility in students, which makes them more mature and sensible and results in overall development. Furthermore, education loan repayment also becomes easy with low interest rates.

Understanding Section 80E of Income Tax Act 

Section 80E of Income Tax Act comprises education loan deduction. It states that “Tax benefit is given to people who avail education loans for higher studies. The deduction can be availed only on the interest amount of the education loan repayment and not on the principal amount”. 

(Note: Education Loan deduction can be claimed for a maximum of eight years, starting from the year in which interest repayment begins.)

Who can Claim an Education Loan Deduction? 

Only an individual who:

• It is not available to HUF or any other kind of taxpayer
• Has taken a loan for the higher education of self, spouse, or children or for a student for whom he/she is a legal guardian 
• pay taxes under the old tax regime

If the individual satisfies the above-stated points, he/she is eligible to claim a deduction when they start their education loan repayment. 

Who is not Eligible for Section 80E Deduction on Education Loan?

If you lie in the following category, you cannot demand a deduction of Education Loan:

• Hindu undivided families
• Loan taken from friends or relatives 
• Not taken for higher education
• If the claim exceeds eight years
• Not opting for the old tax regime

Eligibility criteria for education loans

For students embarking on higher education in India, to get their loan money as soon as possible, the documentation process is also kept to a minimum. The following is the list of eligibility criteria for education loans. 

The candidate applying for an education loan in India must fulfill the following eligibility criteria:

• The candidate should be a resident of India
• Candidate should Have confirmed admission to a recognized educational institution in India or abroad
• Candidate should be Within the age brackets of 18-35 years during loan application
• Must be Undergoing a graduate/postgraduate degree or a PG Diploma
• Secured admission to a college or university affiliated with the University Grants Commission (UGC)/All India Council for Technical Education (AICTE)/Govt. Etc.
• Students pursuing full-time courses need to have a co-applicant who can be either a parent/guardian or spouse/parent-in-law (in the case of married candidates).
• Must have a regular income source.

Education loans in India

There are various education loans provided by banks in India with low interest rates. Education loan interest rates differ from one bank to another. The following are some banks with their interest rates that will make education loan repayment easy in India: 

Banks	Interest rates
SBI Education Loan	8.05% p.a. to 11.75% p.a.
Axis Bank Education Loan	13.70% p.a. to 15.20% p.a.
ICICI Bank	11.85% p.a. onwards
HDFC Bank	8.64% p.a. to 9.50% p.a.
Axis Bank	13.70% p.a. to 15.20% p.a.
IDBI Bank	8.55% p.a. to 11.15% p.a.
Bank of India	8.35% p.a. to 11.05% p.a.

Summary

The blog explores the significance of education loans in India, and the need for the educational loans highlighting their role in easing the financial burden of higher education and enabling students to pursue academic goals. It also covers the tax benefits available under Section 80E of the Income Tax Act, which allows for deductions on interest payments for education loans. Moreover, the blog also outlines the eligibility criteria for obtaining an education loan and provides a comparison of interest rates offered by various Indian banks, with the State Bank of India offering the lowest rate. At last, the blog concludes with a brief FAQ that addresses common questions about education loans and tax benefits.

FAQs

1. Can co-applicant claim tax benefit on education loan

Both the applicant and the co-applicant can claim tax benefits under section 80E of the Income Tax Act for interest paid on an education loan.

2. Which bank in India is currently providing the education loan at the lowest interest rate?

As per the survey of 2024, the State Bank of India is providing education loans at the lowest interest rate of 8.05% p.a. Taking loan from SBI can assist you in your education loan repayment.