Features and Tax Benefit of Education Loan in India

By | 26/11/2016


The salient features of the scheme are as under:

  • The scheme envisages loans up to Rs.7.5 lakh for studies in India and up to Rs. 15 lakh for studies abroad.
  • For loans up to Rs. 4 lakh no collateral or margin is required and the interest rate is not to exceed the Prime Lending Rates (PLR)
  • For loans above Rs. 4 lakh the interest rate will not exceed PLR plus 1 percent.
  • The loans are to be repaid over a period of 5 to 7 years with provision of grace period of one year after completion of studies.

Tax Benefit

Repayment of an education loan is deductible under section 80E of the Income Tax Act. The yearly limit for deduction is Rs. 40,000 (for both the principal and the interest). Only loans taken for higher education – full time studies in any graduate, professional, and pure and applied science courses – may claim deduction. The deduction will be available for a maximum of eight years starting from the day you start repaying.

Equitable Access to quality higher education has been a concern of the University Grants Commission. To this purpose the Commission, besides encouraging colleges and Universities to provide for liberal financial support to the meritorious but needy students, has also been instrumental in educational loan scheme. The Reserve Bank of India (RBI) has issued guidelines in this regard to all commercial banks.

A large number of banks have already launched educational loan schemes. Provided below are links to the respective websites of individual banks offering such facilities.

List of Banks Offering Educational Loans:

Allahabad Bank

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Central bank of India

Panjab National Bank

State Bank of Saurashatra

Andhra Bank

Corporation Bank

State Bank of India

Dena Bank

Bank of Baroda

Syndicate Bank

State Bank of Bikaner and Jaipur

Indian Bank

Bank of Maharashtra

Uco Bank

State Bank of Indore

Indian Overseas Bank

Canara Bank

Union Bank Of India

State bank of Mysore

Oriental Bank Of commerce

United Bank Of India

Panjab and Sindh Bank

Vijaya Bank

Federal Bank Limited

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