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Tax benefits have lowered the effective rate on home loans Year Aug-11 Aug-10 Loan amount (Rs) 20,00,000 20,00,000 Tenor (in years) 20 20 Nominal interest rate (%) 10.75% 9.00% Maximum deduction for interest allowed 150000 150000 Deduction on principal 100000 100000 Tax rate applicable 30.90% 30.90% Total amount paid every year 243,655 215,934 Interest component 213545 178480 Principal repaid 30110 37454 Tax amount saved 55654 57923 Effective interest paid on home loans 1,57,891 1,20,557 Effective interest on home loans 7.89% 6.03%

Aug-09 20,00,000 20 8.25% 150000 100000 30.90% 204,496 163472 41024 59026 1,04,446 5.22%


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