Home loan emi - pre emi or full emi

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BHUVANESHWER PRASAD (Querist)
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13 September 2012 Dear Expert,

I just wanted to know that, What is the basic difference between pre-EMI and EMI.

Does Pre EMI contains only interest component or it does contain both interest and principal?

Which is advisable to go for between above two?

And What is tax implication on both the side?

Thanks in Advance.

CA Sripal Jain

CA Sripal Jain (Expert)
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13 September 2012 It's more expensive to opt for the pre-EMI option as you pay interest till the loan is fully disbursed as well as during the loan tenure of.

You will not be able to avail of any tax deduction during the pre-EMI phase. The entire interest that you pay will be aggregated and allowed as deduction in five equal instalments only after the construction is complete.

CA Sripal Jain

CA Sripal Jain (Expert)
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13 September 2012 its advisable to go for pre emi ,if you want to sell your house immediately after construction,since pre EMI r genrrally levied when property is under construction

MOHD AFROZ

MOHD AFROZ (Expert)
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13 September 2012 CA Sripal Jain Sir is saying right,

EMI option is better than Pre-EMI option because if you opt the EMI option whatever interest you have paid in the previous year.You will eligible to avail tax benefit.
However, to avail tax benefit on interest you have to obtain interest Certificate from the Bank.

BHUVANESHWER PRASAD

BHUVANESHWER PRASAD (Querist)
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13 September 2012 Thanks Sripal,

i got the point here that we will not be enjoying any benefit if we opt for Pre-EMI option. now there is one doubt, This Pre-EMI is only the interest part which we pay to bank as pre-emi or they add principal part as well.

Plz clarify..:)

CA Sripal Jain

CA Sripal Jain (Expert)
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13 September 2012 no bank levies principal ,they levy only interest in case of pre EMIs,as the amount is disbursed for shorter term ,so it acts like a normal loan ,thus bankers normally levy only interest

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