What is Education Loan Interest Rate Subsidy? Know details like Guidelines and Eligibility!

Posted In education loan On April 12, 2019
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Subsidization of loans is where the government pays for interest part of the loan or a percentage of the loan on behalf of the borrower. In India, any student who is eligible for tax benefit under Section 80E is entitled to receive the subsidy on Education loans.

Details on Education loan interest subsidy:

The entire interest paid on the Education loan is under Section 80E of the Income Tax Act. The Central Sector Interest Subsidy Scheme (CSIS) provides concession to economically backward students on the entire interest rates paid during the moratorium period. This scheme is mainly considered to provide Education loan in India under the IBA Model Education Scheme whose gross family income is up to 4.5 lakhs per annum. Besides, we also need to keep in mind the following details on interest subsidy:

  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.

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

Eligibility on Education loan Interest subsidy:

The subsidy is available for a first undergraduate degree or first post-graduate degrees diploma courses in India and also admissible for integrated courses (graduate + postgraduate). Also, interest subsidy under this scheme shall not be available for those students once they discontinue the course midstream, or are expelled from the institutions on disciplinary or academic grounds. However, on receiving necessary documentation from the Head of Educational institution, the interest subsidy will be available due to medical grounds.

After all the necessary documentation is over, the disbursement is carried out on a half-yearly or yearly basis in accordance with the institute or university’s semester fee payment procedure. Please check your eligibility for subsidised loans with the bank before applying for the loan.
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