An Equated Monthly Installment is the fixed monthly payment combining principal repayment and interest, calculated so the loan is fully repaid by the last payment. For India's hundreds of millions of home loan, car loan, and personal loan borrowers, understanding the EMI calculation — the formula, amortization, prepayment impact, and tax benefits — is fundamental financial knowledge. ## The EMI Formula EMI = P x r x (1 + r)^n / [(1 + r)^n - 1], where P = Principal, r = monthly interest rate (annual rate / 12 / 100), n = total monthly payments. For ₹50 lakh at 8.5% for 20 years: r = 0.0070833, n = 240. EMI = approximately ₹43,126/month. Total payment = ₹1,03,50,240. Total interest = ₹53,50,240 — exceeding the original principal. Every year of tenure and every percentage point of interest rate substantially increases total interest. ## Amortization — The Shifting Interest-Principal Split In early months, most EMI goes toward interest; in final months, almost all goes toward principal. For the ₹50 lakh example: Month 1 = ₹35,417 interest + ₹7,709 principal. Month 60 = ₹33,500 interest + ₹9,600 principal. Month 120 = ₹27,600 interest + ₹15,500 principal. This is why early prepayment is more than 5 times as effective as late prepayment — it saves interest on the prepaid amount for many more remaining months. ## Current Home Loan Rates India 2026 Approximate starting rates: SBI from 8.35%, HDFC Bank from 8.50%, ICICI Bank from 8.40%, Axis Bank from 8.50%, Bank of Baroda from 8.35%. Most home loans use floating rates linked to the RBI repo rate through EBLR. When RBI cuts the repo rate, your home loan rate reduces within three months. ## Prepayment Strategy — Saving Lakhs RBI regulations prohibit prepayment penalties on floating rate home loans from banks for individual borrowers. Paying ₹1 lakh extra annually from Year 1 closes a ₹50 lakh 20-year loan approximately 5 years early and saves approximately ₹15.5 lakh in total interest. Even ₹5,000 extra monthly saves ₹13-14 lakh and closes the loan 4 years early. ## Home Loan Tax Benefits — Section 24b and 80C Under the old tax regime: Section 24(b) deducts home loan interest up to ₹2 lakh per year for self-occupied property (saving ₹62,400 annually at 30% bracket). Section 80C deducts principal repayment up to ₹1.5 lakh within the overall 80C limit. Both deductions are unavailable under the new tax regime for self-occupied property — a significant factor in the old vs new regime comparison for home loan borrowers.