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What is the repayment holiday in education loan?

The moratorium period is usually the course duration plus 6 months or 1 year where the lender allows a student to take adequate time to sort out their finances and prepare for loan repayment accordingly.

Banks generally charge interest for the moratorium period, which is later added to the principal.

Tax benefits

There are no tax benefits on personal loans. However, spending on education through an education loan helps borrowers save on income tax.

Borrowers can claim a deduction of interest paid on a loan taken for pursuing higher education under section 80E of the Income Tax Act, 1961.

Not only this, under the Liberalized Remittance Scheme (LRS), the Tax Collected at Source (TCS) on amounts in excess of INR 7 lakhs is only 0.5%, if the funds are remitted through an education loan. The TCS on funds remitted through any other source is 5%.

Moreover, education loans come with an additional interest concession for girl borrowers of 0.5%, which is not available in personal loans.

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