Financial Calculators
Home Loan Tax Benefit Calculator
Interest under 24(b), principal under 80C. Here is what the first year's EMIs actually save.
Tax saved in the first year
₹89,853
effective interest rate about 7.29%
- Monthly EMI
- ₹43,391
- Year-1 interest paid
- ₹4,21,182
- Interest deductible
- ₹2,00,000
- Year-1 principal repaid
- ₹99,511
- Principal deductible
- ₹99,511
Old tax regime only, for a self-occupied house. The interest deduction is under Section 24(b), the principal under Section 80C alongside PPF, ELSS and insurance premiums, so the 80C benefit is real only if that limit is not already used up. Later years shift from interest to principal.
These figures are for illustrative purposes only and are not investment advice. Please consult your investment adviser for investment related advice.
The loan the tax code subsidises
Under the old regime a self-occupied home loan earns two deductions: the interest portion of your EMIs up to a cap, and the principal portion within the 80C limit. In the early years an EMI is mostly interest, so the interest deduction usually hits its cap immediately while the principal deduction competes with your other 80C investments.
The tax saved lowers the effective cost of borrowing, which is the number to compare against investment returns when deciding whether to prepay.
First-year split and deductions
EMI = P x i x (1+i)^n / ((1+i)^n - 1), i = rate/12\nYear-1 interest = sum of monthly interest; principal = 12 x EMI - interest\nTax saved = (min(interest, 24(b) cap) + min(principal, 80C cap)) x slabWorked example: a Rs 50,00,000 loan at 8.5% for 20 years has an EMI of Rs 43,391. Year-1 interest is Rs 4,21,182 (Rs 2,00,000 deductible) and principal Rs 99,511 (fully within 80C). At the 30% slab that saves Rs 89,853 and brings the effective rate down to about 7.29%.
Frequently asked questions
Is this available under the new regime?
For a self-occupied house, no: both deductions belong to the old regime. Interest on a let-out property is treated differently. Check which regime works out better overall before relying on this.
Does the saving continue every year?
Interest falls and principal rises as the loan ages, so the deductible interest stays capped for many years while the 80C benefit grows, subject to what else is using the limit.
Do joint borrowers each get the deduction?
Co-owners who are also co-borrowers can each claim their share within the caps, which is the main reason couples take joint loans.
Should I keep the loan for the tax benefit?
Only if you can earn more, after tax, than the effective rate shown. Run the Prepay vs Invest calculator with that rate.
Borrow at the rate you actually pay.
We help you weigh prepayment against investing using the after-tax cost of your loan, not the headline rate.