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RupeeFrame

Spare money every month?

Prepay your home loan, or invest?

  • Your net worth both ways, after tax
  • Loan closed early, or a SIP built
  • The return your SIP needs to win
Investing wins by
₹12.4 L
in what you own in 2041, if your SIP earns 12% a year · prepay ₹80.23 L vs invest ₹92.64 L

Which return makes investing worth it?

● your assumption: 12%

Move along the line to see who wins at each return.

Your inputs

₹
₹1 L₹5 Cr
%
5%16%
yrs
1y30y
Your spare money
₹
₹0₹2 L
₹
₹0₹1 Cr
%
4%18%
Your taxOptional: old regime counts 24(b) and 80C on the loan
Tax regime
Your tax slab
₹
₹0₹1.5 L

Up to ₹2L of interest a year (Section 24(b)) and the principal you repay, within what is left of ₹1.5L (80C), come off your tax.

What you already holdOptional: see where investing leaves your mix
yrs
1880
Comfort with ups and downs
₹
₹0₹10 Cr
₹
₹0₹10 Cr
₹
₹0₹10 Cr
₹
₹0₹10 Cr

Switch on to see what future amounts will buy at today's prices.

Keep your inputs as a file; it never leaves your device.

What this means

  • Investing wins only above 9.1% a year. You assume 12%.
    Why?

    That is 2.9% of headroom, before tax.

  • Prepaying is a sure 8.5% return. SIP returns are not.
    Why?

    Every rupee you prepay stops interest at that rate. 15-year equity returns in India have ranged widely.

  • Prepaying closes the loan 7 yrs 4 mo sooner and saves ₹16.35 L.
    Why?

    After that, your whole EMI goes into the SIP, which is why the prepay line climbs steeply at the end.

  • New regime: no tax break on the loan, so it costs its full 8.5%.
    Why?

    Pick the old regime in Your tax to count 24(b) interest and 80C principal.

  • Keep 6 months of expenses aside first, whichever you pick.
    Why?

    Prepaid money can't be taken back out of the loan.

More details

Tax breaks on your loan, year 1

  • Section 24(b) interest, ₹2L a year cap₹0 deducted · saves ₹0
  • Section 80C principal, ₹1.5L cap with your other 80C₹0 deducted · saves ₹0

New regime: no deduction, so the loan costs its full 8.5%. Switch to Old to see the saving.

What you own, both ways

Investments (after tax, if you sold) minus the loan still owed. Shading shows who is ahead.

Prepay, invest or split?

  • Prepay it allGuaranteed saving₹80.23 L · loan closes 2034
  • Split 50 / 50Half safe, half growth₹85.03 L · loan closes 2036
  • Invest it allMostDepends on returns₹92.64 L · loan closes 2041

If a market fall would make you stop your SIP, the split or full prepay is the plan you'll stick with.

Next stepSee a ₹20,000 monthly SIP growIts range of outcomes over 15 years, after tax and inflation.Next stepPlan how to prepay your ₹40 L loanStep-up EMIs, an extra EMI a year or a lumpsum: see which closes it soonest.

How it's calculated

Both paths spend exactly the same money each month: your EMI plus your surplus. They are compared on net worth when your loan would have ended anyway.

  • Prepay: the surplus goes to principal every month, so the loan closes early. From then on, the old EMI and the surplus go into a SIP.
  • Invest: the loan runs its full term and the surplus goes into a SIP from day one.
  • Net worth is what your investments would fetch if sold, minus the loan still owed. Equity gains above ₹1.25 lakh are taxed at 12.5% (long-term capital gains).

The break-even return is the SIP return at which both paths end level. Above it, investing wins.

Each year's refund is invested, so investing keeps it for the whole term.

Home-loan tax breaks (old regime only). The refund is the deduction times your slab rate. The new regime allows no deduction on a self-occupied home.

24(b) saving = min(interest, ₹2,00,000) × slab
80C saving = min(principal, ₹1,50,000 − other 80C) × slab
Cost of the loan = rate × (1 − 24(b) saved ÷ interest paid)

Tax figures follow Budget 2025 rules, for FY 2025-26 onward.

Common questions

Is it better to prepay a home loan or invest in SIP?
It depends on the gap between your loan rate and what your investments earn after tax. Prepaying is a guaranteed return equal to your loan rate. Investing in equity has usually earned more over 10+ years, but with no guarantee. This calculator finds the break-even return for your loan.
Why is the break-even return higher than my loan rate?
Equity gains are taxed at 12.5% above ₹1.25 lakh, while interest you avoid by prepaying is tax-free. So a SIP must earn a bit more than the loan rate just to match it.
Does the old tax regime change the answer?
Yes. Under the old regime, home-loan interest up to ₹2 lakh a year is deductible, which makes the loan cheaper and investing more attractive. Under the new regime there is no deduction for a self-occupied home.
Should I split between prepaying and investing?
Splitting is a sensible middle path: part of your money earns a guaranteed saving, part grows with the market. It is often the plan people stick with when markets fall.
What should I do before either?
Keep an emergency fund of about six months of expenses, clear costly debt like credit cards, and make sure you have term and health insurance. Prepaid money cannot be withdrawn from the loan later.
How much home-loan tax can I save?
Under the old regime, up to ₹2 lakh of interest a year (Section 24(b)) plus the principal you repay within what is left of ₹1.5 lakh (Section 80C). At the 30% slab that is up to ₹60,000 plus ₹45,000 a year. The new regime allows neither on a self-occupied home.
Why does the calculator ask what I already use under 80C?
The ₹1.5 lakh limit is shared with EPF, PPF, ELSS, life-insurance premiums and tuition fees. Your loan principal only gets what is left, and for many salaried people EPF alone uses most of it.
Does the ₹2 lakh limit apply to joint loans?
It applies to each person. Co-owners who are also co-borrowers each claim up to ₹2 lakh of interest and ₹1.5 lakh under 80C, in proportion to their share of the loan. Enter only your own share here.
What if the home is let out or still being built?
For a let-out home the interest has no cap, but setting a loss against your other income stops at ₹2 lakh a year. Interest paid before you get possession is claimed in 5 equal parts from the year the home is finished, inside the same cap. If a self-occupied home isn't finished within 5 years of the loan, the cap falls to ₹30,000. This calculator models a finished, self-occupied home.
Can I claim stamp duty, and what if I sell early?
Stamp duty and registration count under 80C in the year you pay them, which this calculator does not add. Selling the home within 5 years of getting possession adds the 80C you claimed back to your income.
What about the extra 80EE and 80EEA deductions?
They ended for loans sanctioned after 31 March 2022, so they are not modelled.
How exact is the tax saving?
It is a close estimate: the deduction times your slab rate. Cess (4%) would add a little, and a large deduction can pull you into a lower slab. The Income-tax Act 2025 (from 1 April 2026) renumbers these sections, but the limits stay as above.

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