Education loans from NBFCs do not qualify for tax exemption under Section 80E of the Income Tax Act of India. To avail of the tax exemption, the education loan must be taken from a financial institution that is notified by the Central Board of Direct Taxes (CBDT). For instance, tax exemption can only be availed on loans from banks and HDFC Credila.

Gaurav Jalan CEO and Founder, mPokket, says, “Borrowers should be made aware of the fact that they cannot claim a tax deduction when they are applying for a loan. One should note that it will impact the effective interest rate, particularly if the applicant and the co-applicant are in a high-income-earning bracket.”