EMI means equated monthly instalment. It is the fixed amount you pay the lender each month on a reducing-balance loan. Early months are mostly interest. Later months are mostly principal. The payment itself stays the same if the rate and the tenure stay the same.
The EMI depends on three inputs: the amount borrowed, the yearly interest rate, and the number of months. A longer tenure cuts the EMI and raises the total interest. A higher rate does the opposite to the EMI. The formula uses a monthly rate, which is the yearly rate divided by 12. At a zero rate the EMI is simply the loan divided by the months. Banks round the instalment to the nearest rupee. The last instalment absorbs the rounding so the balance ends at zero.
The rate on the sanction letter is the one that matters. A card rate on a bank’s website is a starting point, not your loan. The calculator’s home-loan starting rate is 8.25%, inside SBI’s card of 7.5% to 8.8% from 15 October 2026. If the loan is on a repo-linked rate, the EMI or the tenure can change when the repo rate changes. The EMI calculator uses the rate you type. It does not guess the next repo move.
Home-loan interest on a house you live in can be deducted only in the old regime, and only up to ₹2,00,000 a year under section 22. The EMI itself is not the deduction. Only the interest part is, and only inside that cap.
A worked example
Borrow ₹50,00,000 at 8.25% for 20 years. The EMI is ₹42,603. Total interest over the loan is ₹52,24,892.
In year one the schedule shows interest of ₹4,08,680 and principal of ₹1,02,556. You paid twelve EMIs and most of that money was interest, because the balance was still close to ₹50,00,000. An extra payment cuts that balance. Later months are then charged on less money.
For a floating-rate loan to an individual, for a purpose other than business, sanctioned or renewed on or after 1 January 2026, the lender cannot levy a prepayment charge. The EMI calculator shows the year-by-year split. The guide walks through the same kind of loan. The rent versus buy calculator uses the EMI when it compares buying with renting.
Mistakes people make
- Treating the card rate as the rate in your sanction letter.
- Thinking a longer tenure saves money because the EMI fell.
- Deducting the whole EMI. Only the interest, and only inside ₹2,00,000 in the old regime, is the housing deduction.
- Expecting the first year to cut the principal quickly. The example’s first year cuts ₹1,02,556.
- Ignoring a repo-linked reset. The EMI you see today can change when the repo rate changes.
The tax section
The EMI formula is the loan contract, not a tax section. The interest deduction is section 22(1)(b) (this was section 24(b)), capped at ₹2,00,000 for a self-occupied house. The principal can fall under section 123 (this was section 80C). Section 202 drops both. The home-loan tax guide is the longer version.
Questions
Why is my EMI mostly interest at the start?
Interest is charged on what you still owe. On a ₹50,00,000 loan at 8.25% for 20 years, the first year is ₹4,08,680 of interest and ₹1,02,556 of principal. The EMI itself is ₹42,603.
Does a longer tenure make the loan cheaper?
It cuts the monthly payment and raises the total interest. On this 20-year example the interest over the full loan is ₹52,24,892, which is more than the ₹50,00,000 you borrowed.
Is the EMI tax-deductible?
The EMI is not the deduction. In the old regime, interest on a house you live in can be deducted up to ₹2,00,000 a year under section 22. The principal can sit in the section 123 cap. The new regime allows neither.
Sources
Figures checked 28 Oct 2026.