From the year 2008 to 2014, the average cost of education in India has increased by a staggering 175%. This is to a great extent owing to the cost of studying at a top institute in India which can range from anywhere between Rs. 10 lakh to Rs. 25 lakh. This can go up even further if the student decides to pursue his education from any university abroad.
As a result, the number of applicants for education loan has gone up significantly. However, not many can qualify for an education loan and as such have to opt for a loan against property instead. This is because the latter has many benefits such as a higher loan amount, easy application process, and low-interest rates which makes it a better proposition for loan seekers.
Another big benefit of an education loan scheme is that of the tax benefits which it provides, which has been explained below -
- Tax Exemption on the Interest Amount- There is a difference in the tax exemption which is availed for a loan obtained for educational purposes and a home loan. In the case of the latter, exemption on both the interest and the principal parts can be availed. However, in an educational loan, only the interest part is available for exemption. On the bright side, however, there is no upper limit for the amount of exemption which can be availed on the interest part.
- Applicable for Interest Repaid for Eight Years- The repayment period for education loan can go up to twenty years. However, the tax benefits can be availed for only eight years. This is because under Section 80E it has been stated that individuals can claim tax exemption only on the interest amount for eight years beginning from the first year of repayment. Thus, if a person has repaid the loan in 10 years, he will get tax exemption benefits only for eight years.