What changes your EMI
| Change | Effect |
|---|---|
| Higher interest rate | Higher EMI and total interest |
| Longer tenure | Lower EMI, much higher total interest |
| Part-prepayment | Lower EMI or shorter tenure; saves interest |
| Floating rate reset | Banks usually extend tenure unless you ask for higher EMI |
Tax benefits on loans
- Home loan (self-occupied): interest up to ₹2 lakh under Section 24(b) and principal within 80C — old regime
- Let-out property: interest deductible against rent in both regimes; loss set-off against other income limited
- Business loans: interest is a business expense
- Education loan: interest deductible under 80E for 8 years — old regime
- Personal and car loans for personal use: no deduction
Worked example: ₹10 lakh business loan
- 1Loan ₹10,00,000 at 10% a year for 5 years (60 months); monthly rate 0.8333%.
- 2EMI = ₹21,247.
- 3Total paid = ₹12,74,823; total interest = ₹2,74,823.
Interest is about 27% of the loan amount over 5 years.
