I have done some calculations to undertand total outflow in home loan versus net returns on re-investment of tax savings, need your views on it.
House loan = Rs 25,000 (joint loan – 50% each)
Interest rate = 11%
Period = 180 months
EMI = Rs 28415 (joint emi)
Tax savings –
Maximum = Rs 150000 under Sec 24 on interest
Maximu = Rs 100000 under Sec 80C on principal
Assuming possession on day 1.
Assume = Rs 12000 per head per year principal taken under Sec 80C
Assume = tax bracket of 30% both
Tax savings (year 1) = Rs 106471 —> re-investment on FD for 15 years @ 8% post-tax rate = Rs 312726. (joint).
Similarly other data points will be –
Tax Savings on Interest u/Sec 24 @30% bracket joint loan + Rs 25,000 of principal u/Sec 80C Investment of tax-savings @ 8% rate
8%
Year Annual interest paid Tax savings “FD return
after completion of
180 months from 1st installment”
1 INR 271,570 INR 106,471 INR 312,726
2 INR 263,538 INR 104,061 INR 283,008
3 INR 254,576 INR 101,373 INR 255,274
4 INR 244,578 INR 98,373 INR 229,371
5 INR 233,423 INR 95,027 INR 205,156
6 INR 220,976 INR 91,293 INR 182,495
7 INR 207,090 INR 87,127 INR 161,266
8 INR 191,596 INR 82,479 INR 141,354
9 INR 174,310 INR 77,293 INR 122,654
10 INR 155,023 INR 71,507 INR 105,067
11 INR 133,504 INR 65,051 INR 88,502
12 INR 109,496 INR 57,849 INR 72,873
13 INR 82,709 INR 49,813 INR 58,101
14 INR 52,822 INR 40,847 INR 44,114
15 INR 19,477 INR 30,843 INR 30,843
Net, i wil pay Rs 51 lakh on principal + interst.
Investment returns will give Rs 23 lakh at the end of 15 years.
So, net i pay Rs 28 Lakh, which i think is good.
Am i thinking right?