Key Takeaway
Education loans in India offer tax deduction on interest (Section 80E) with no upper limit for 8 years from the first year of repayment. Interest rates range from 8% to 15% based on the institution and loan type.
Education Loan Breakdowns:
- Starting Loan amount: ₹10,00,000.
- Interest accrued during 4 Years moratorium (capitalized): ₹4,20,000. Final repayment principal: ₹14,20,000.
- Total interest component: ₹12,99,292.
- Net repayment amount (Principal + Interest): ₹22,99,292.
- Tax savings under Section 80E (assuming 30% slab): ₹3,89,788. Net effective interest cost: ₹9,09,504.
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Frequently Asked Questions
What is the moratorium period in education loans?
The moratorium period is a repayment holiday consisting of the course duration plus a grace period (usually 6 to 12 months) during which you are not required to make EMI payments.
Does interest accumulate during the moratorium?
Yes. Simple interest is charged on the disbursed amount during the moratorium. If unpaid, this accrued interest is added to your principal when EMIs start, compounding your future costs.
What is the tax benefit under Section 80E?
Section 80E of the Income Tax Act allows you to claim a full deduction on the interest component of your education loan repayments for up to 8 years, with no upper monetary cap.
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