Education Loans & Budget 2025-26: Latest Updates, Benefits & More

The Union Budget 2025–26, unveiled on 1 February 2025 by Finance Minister Nirmala Sitharaman, stands out as a student-friendly roadmap toward global education. Aligning with this year’s theme ‘Sabka Vikas’ (growth for all), the latest updates are anchored on the pillars of tax ease, education access, skill-building, and innovation. The Government reaffirmed its commitment to nurturing every Indian’s potential, especially those from underrepresented and economically weaker sections, toward shaping India’s future as a global leader.

If you are a student planning to study abroad and going through economic challenges, you know how every penny and every process counts. That’s why this article is your go-to resource that sets out to decode the Budget changes. Let’s cut through the noise and get straight to the important insights.

Key Highlights of Budget 2025-26 & Education Loans for Abroad Studies

For Indian study abroad aspirants, the Union Budget 2025-26 is more than just numbers; it’s a blueprint for financial relief and smarter access to higher education funding. This year’s reforms are designed to ease the burden on families while opening financial access wider for ambitious learners.

1. Complete TCS Exemption on Education Loan Remittances

If you are using a loan from a specified, Section 80E-compliant Financial Institution to fund your overseas education, the Tax Collected at Source (TCS) on foreign remittance is now fully waived. This education loan tax benefit relief is applicable irrespective of the amount remitted. Earlier budgets imposed a 0.5% TCS on amounts exceeding INR 7 lakhs, but that burden has now been lifted, offering immediate relief and smoother cash flow.

2. Elevated TCS-Free Cap: From INR 7 Lakhs to INR 10 Lakhs for Self-Funded Payments

For families or students financing studies from personal savings or non-education-loan sources, the TCS exemption threshold under RBI’s Liberalized Remittance Scheme (LRS) has been raised from INR 7 lakhs to a substantial INR 10 lakh per financial year. This gives you a larger tax-free window to work with and saves considerable taxes.

3. Reduced TCS Rate: Only 5% on Self-Funded Transfers Above INR 10 Lakhs

As per the latest budget reforms, once your self-funded remittance crosses the INR 10 lakh mark, the TCS on education loan is applied at just 5%. The best part is that it is applied only to the excess amount and not the entire sum, making it far more manageable than previous rates.

4. Strategic Cash-Flow Relief: No Upfront Tax Burden for Loan Users

Because loans take care of TCS, there’s no upfront tax deduction. This means that you retain more of your funds for other essential needs like admission deposits, visa fees, or initial living costs, without waiting for tax refunds.

5. Continued Support for Collateral-Free Loans via CGFSEL

The Credit Guarantee Fund Scheme for Education Loans (CGFSEL) remains active with this budget as well. It continues to offer up to INR 7.5 lakhs in education loans without collateral, with a 75% default guarantee by the Government via NCGTC. This is highly beneficial for students from economically weaker or rural backgrounds.

6. Clear Rules with Strategic Advantage for Students & Banks Alike

The streamlined TCS thresholds and explicit loan guarantee provisions offer much-needed transparency for both applicants and lending Financial Institutions. Banks can process applications faster, while students benefit from fewer interruptions and quicker approvals.

In short, with these updates, the Budget 2025-26 is here to lighten the load while making foreign education more inclusive. But the real question is: how do these changes translate into your day-to-day financial journey as a loan applicant? Well, the next section will help you understand the effects better. 

Impact of Budget 2025-26 on Education Loans for Studying Abroad

Every modification brings with it both opportunities and practical hurdles, and this year’s budget is no exception. While the revised TCS rules and extended loan guarantees can offer smoother cash flow and wider access, applicants may still face challenges like partial coverage of costs, complex eligibility norms, and long-term repayment pressures. Let’s get into the positives that empower students and the challenges that demand careful planning.

Positive Aspects of Union Budget 2025-26

• Greater Cash-in-hand When It Matters Most: With no TCS on education loans, imagine saving INR 25,000 to INR 50,000 or more! That would’ve otherwise been held back. That amount can now go straight toward your admissions deposit, travel, or loan moratorium.

• Higher Freedom for Self-Funding Students: Families paying from savings can now remit up to INR 10 lakhs tax-free, easing stress, simplifying budgets, and giving room to plan across years.

• Transparency for Faster Approvals: The clear, structured rules for TCS and CGFSEL reduce ambiguity, making Banks and remitters more efficient and students less anxious.

Challenges of Union Budget 2025-26

• Loan Quantum Still May not Cover Total Costs: Courses in top Universities can cost anywhere from INR 20 lakhs to INR 50 lakh-plus. Even INR 7.5 lakhs in collateral-free loans only scratches the surface.

• Complexity Around Bank Compliance (80E Issues): Not all banks qualify as 80E-compatible; you must double-check eligibility to avoid missing out on tax relief.

• Repayment & Interest Burden Post-Moratorium: Many subsidized loans still flow into standard education loan interest rate and EMIs, which over the years can weigh heavily, especially after graduation when adjusting to life abroad.

• Exclusion Based on Minor Income Differences: Some subsidy or loan guarantee criteria exclude students whose families’ incomes slightly exceed defined thresholds, leaving a small but concrete gap.

At the end of the day, Budget 2025-26 strikes a balance between relief and responsibility. Yet, it also reminds us that smart planning and guidance are decisive to bridge the remaining gaps. For every aspiring student, facing it wisely will make all the difference. Read our next section to understand this better.

How does Élan Loans assist in overcoming the Study Abroad Loan Challenges?

While Budget 2025-26 has eased tax norms and widened opportunities, the road from loan application to actual disbursement is still paved with paperwork, eligibility checks, and hidden hurdles. That’s exactly where Élan Overseas Education Loans steps in with their expertise. Here’s how Team Élan can help you find suitable solutions for all kinds of challenges.

1. Guiding through Eligibility Complexities

Understanding whether your loan qualifies under Section 80E for tax benefits or if it can be backed by CGFSEL guarantees isn’t always upfront. Élan’s Expert Loan Advisors decipher these rules, assess your profile, and match you with the right Banks and schemes, ensuring you never miss out on benefits you rightfully deserve.

2. Personalized Loan Structuring for Maximum Savings

What if you could reduce your TCS liability just by splitting remittances across financial years, or by routing certain payments through family accounts? Team Élan helps you strategically structure your remittances to stay within exemption limits and minimize tax outflow, turning regulations into opportunities.

3. Extends Collateral-Free Opportunities

For students from economically weaker sections (EWS), OBC, or SC/ST backgrounds, the absence of collateral often feels like a wall. Through its collaboration with the leading Public and Private Sector Banks, Élan provides collateral-free education loans under CGFSEL, giving wings to deserving students who otherwise feel grounded by financial constraints.

4. Documentation Made Effortless

From Vidya Lakshmi portal registrations to securing the right KYC, income certificates, caste or EWS documentation, Élan’s team ensures that your file is complete, compliant, and error-free. This saves weeks of back-and-forth with banks and strongly increases approval speed.

5. Faster Approvals, Smarter Disbursements

Every lost day can delay a visa interview, fee payment, or even your admission. Élan accelerates this by aligning your loan disbursements with University deadlines, handling coordination with Banks, and keeping you stress-free while you focus on preparing for your move abroad.

6. Post-Loan Handholding for Peace of Mind

Getting the education loan for abroad studies sanctioned is only half the journey. Élan goes further, helping you understand interest subsidy schemes like CSIS, guiding you through the moratorium period financial management, and offering repayment strategies once you secure a job abroad. With Élan, you are not abandoned after approval; you are supported until your repayment is completely done.

In essence, Élan Overseas Education Loans changes confusion into clarity, obstacles into pathways, and aspirations into realities. When finance becomes frictionless, your focus can finally return to where it belongs: your education, your future, and your dreams abroad!

Reach out to Team Élan today and get the clarity, structure, and support you need to shape your global journey with financial confidence! We also offer free virtual counselling sessions for your convenience.

FAQs on Budget 2025-26 & Education Loans for Abroad Studies

1. Does the TCS exemption apply to all types of education loans?

No, the exemption is valid only when the education loan is taken from a specified Financial Institution that qualifies under Section 80E of the Income Tax Act. Loans from informal lenders or unregistered NBFCs may not qualify.

2. If I remit more than INR 10 lakh in a year through self-funding, how much TCS will I actually pay?

You will pay 5% TCS only on the amount exceeding INR 10 lakhs. For example, if you remit INR 15 lakhs, only INR 5 lakh is taxed at 5%, resulting in INR 25,000 TCS, not on the whole INR 15 lakhs.

3. Can I claim back the TCS deducted on self-funded education expenses?

Yes, TCS is not an additional tax; it’s an advance tax. You can adjust it against your total income tax liability while filing returns or claim a refund if your liability is lower.

4. What if my loan requirement is higher than INR 7.5 lakh under CGFSEL?

The INR 7.5 lakh limit is specifically for collateral-free loans covered under CGFSEL. If your need is higher, Banks may ask for collateral or a co-borrower. Team Élan can help you structure a mix of collateral-free and collateral-backed loans.

5. Do interest subsidies apply to all students taking loans for abroad studies?

Not all, however, schemes like the Central Sector Interest Subsidy Scheme (CSIS) are available only to students from Economically Weaker Sections (EWS), with parental income not exceeding INR 4.5 lakhs annually.

6. Does the budget impact students going to all countries equally?

Yes, the TCS rules apply universally to all international remittances for education, whether you are going to the US, UK, Canada, or any other country. However, the total cost burden varies by destination, so the savings may feel more impactful for some.

7. Can I combine scholarships with education loans under these schemes?

Loans can be taken for the remaining cost after applying for scholarships or grants. In fact, showing scholarship awards may improve your loan approval chances since it lowers the lender’s risk.

8. How do these budget changes affect repayment after studies?

The changes mainly affect upfront liquidity by reducing TCS and simplifying loan guarantees. Repayment post-study still depends on the loan terms, moratorium period, and whether you qualify for an interest subsidy.