- Any debt/loan comes at a cost (interest rate), so home-loan is not an exception.
- As per Indian Taxation, one can save;
- up to Rs. 2,00,000 under Section 24(b) on the interest portion
- And, up to Rs. 1,50,000 can be claimed under Section 80C for the principal repayment.
- Conditionally, additional Rs.50,000 under Section 80EE or Rs. 1,50,000 can be claimed under 80EEA
- EMI has 2 components:
- Interest payment
- Principal repayment
- The more you payoff at start more the benefits. ( Please check with your bank before depositing extra small amount, some banks allow only few attempts to repay before due date )
- A person in 30% tax slab decides to keep the loan for longer then, that person can save maximum Rs. 75,000 per year but, pays huge interest to the bank.
- Therefore, as per the calculations; its always better to payoff your loan as early as possible than waiting for minor income tax gains.
- Please feel free to use excel-sheet loan_repayment-calculator to fill up your numbers & decide.
nikhilmachcha 