How to Get Subsidy on Education Loan in India?

Posted In education loan On April 11, 2019
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Student loan subsidization is when the government provides concession to the students while repayment of debts. In India, Education loan subsidy is eligible only for interest part of the loan. The eligibility for interest deduction under 80E is available only if an individual is directly associated with the borrower (for example parents, spouse or any legal guardian). For any other member of the HUF or other types of Assessees, this tax benefit is not valid.

The Education loan subsidy in India is provided by the Ministry of Human Resource Development (MHRD), Government of India. In 2009 they launched a scheme known as the Central Sector Interest Subsidy Scheme (CSIS) which provides full interest subsidy during the moratorium period for pursuing technical/professional courses in India. The Central Sector Interest Subsidy scheme (CSIS) benefits all categories of students belonging to weaker sections of the society for pursuing professional/technical courses from recognized universities/colleges in India. Other subsidy schemes include the Dr Ambedkar Central Sector Scheme of Interest Subsidy on Education Loans provides interest subsidy on Educational Loans for overseas studies for Other background classes (OBCs) and Economically Background classes (EBCs).

Below is a list of Education loan subsidy details that are important to consider:

  1. Eligibility- Students taking admissions in full-time courses and eligible for tax benefit receive the subsidy in Education loans.

  2. Amount- There is no upper limit to receive loan subsidy but some banks provide 0.5% subsidy to the girl child and physically disabled people.

  3. Interest- In the case of unsubsidized loans, the interest part is added to the principal amount during repayment while in case of subsidized loans tax benefit is eligible only on the interest part of the amount.

  4. Repayment- While borrowers receive the subsidy in the loan amount, the income tax benefit is applicable only for eight years or until the whole repayment is made (whichever is earlier).

Other important points to keep in mind about the subsidy on Education Loan:

  1. The principal part of the loan does not qualify for the tax benefit.

  2. The income tax benefit is only available for up to a period of eight years or until the full payment of the interest is done, whichever is earlier.

  3. This tax benefit can be availed both for registered full time and vocational courses.

The subsidy on Education loan in India can be claimed when one starts to pay the Simple Interest (SI) either during the course tenure or after completion of the course and can be availed during the entire tenure of SI repayment. Your company’s HR department must be aware of the loan taken for less TDS to be deducted from your salary. The Education loan subsidy portal provides a thorough description of the CSIS schemes and guidelines for its eligibility. Visit the portal at  https://mhrd.gov.in/scholarships-education-loan-4.
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