What is EMI?
Also called: equated monthly instalment, kist, monthly instalment, home loan EMI
An EMI (equated monthly instalment) is the fixed monthly amount you pay to repay a home loan, covering both interest and principal. The split changes over time: early EMIs are mostly interest, later ones mostly principal.
Three numbers decide it: the loan amount, the interest rate and the tenure. A ₹50 lakh loan at 7.5% for 20 years works out to an EMI of roughly ₹40,280. Across 240 months you repay about ₹96.7 lakh, so interest comes to about ₹46.7 lakh. In the first year, close to three-quarters of each instalment is interest.
Most home loans in India are floating-rate and linked to an external benchmark, usually the RBI repo rate (5.25% at present), plus the lender's spread. When the repo rate changes, the rate on your loan resets at the next reset date, typically within three months. Banks often keep the EMI the same and change the tenure instead. That's convenient when rates rise but quietly adds years to the loan, so look at the remaining tenure on your annual statement, not only the EMI.
Prepayment is the most effective lever you have. RBI rules do not allow lenders to charge a foreclosure or prepayment penalty on floating-rate home loans taken by individuals. Paying an extra ₹2 lakh in year three saves far more interest than the same amount paid in year fifteen, because it cuts principal that would otherwise attract interest for many years.
On tax, principal repaid falls under the old Section 80C, now Section 123 of the Income-tax Act, 2025, within the ₹1.5 lakh limit, and interest under the old Section 24(b), now Section 22, up to ₹2 lakh for a self-occupied home. Both are old-regime benefits.
A Bengaluru couple borrows ₹50 lakh at 7.5% for 20 years, with an EMI of about ₹40,280. If the rate rises by 0.5%, the bank may keep the EMI at ₹40,280 and stretch the remaining tenure by more than a year instead.
Borrowers choose the longest tenure to get the smallest EMI without seeing the total interest. On ₹50 lakh at 7.5%, moving from 20 to 30 years cuts the EMI by about ₹5,300 but adds roughly ₹29 lakh in interest.
Questions people ask about EMI
Does the EMI change when the RBI changes the repo rate?
The interest rate on a repo-linked loan changes at the next reset. Your bank may change the EMI or the tenure; you can usually ask for the one you prefer.
Is it better to reduce EMI or tenure after a prepayment?
Reducing tenure saves more interest. Reduce the EMI only if you need the monthly cash flow.