Here’s how to calculate subsidy on home loan;
You use the Pradhan Mantri Awas Yojana Credit Linked Subsidy Scheme (PMAY-CLSS) rules. This subsidy is an interest subsidy credited upfront to your loan to reduce your effective principal and monthly EMIs.
The calculation depends on your income category, eligible loan portion, interest subsidy rate and tenure.
How to Calculate Home Loan Subsidy?
Your annual household income places you in one of the four PMAY categories:
EWS (≤ Rs. 3 L): 6.5% subsidy
LIG (Rs. 3 L to Rs. 6 L): 6.5% subsidy
MIG I (Rs. 6 L to Rs. 12 L): 4% subsidy
MIG II (Rs. 12 L to Rs. 18 L): 3% subsidy
Each category has a cap on the portion of your home loan that qualifies for subsidy:
EWS/LIG: subsidy on up to Rs. 6 L of loan
MIG I: subsidy on up to Rs. 9 L
MIG II: subsidy on up to Rs. 12 L
If your total home loan exceeds these caps, only the subsidised portion gets the benefit; the balance is charged at normal interest.
The eligible loan portion is subsidised at the rate for your category e.g., 6.5%, 4% or 3% per annum. The subsidy is then converted into a present value using the government's discounting (NPV) formula typically at 9% over 20 years or actual loan tenure, whichever is less.
Example structure: Suppose you take a Rs. 6 L loan and fall under EWS/LIG (6.5% subsidy). The interest subsidy amount is Rs. 2.67 L is computed as the NPV of interest savings and credited upfront to your loan account. Rs. 2.67 L is roughly the present value of 6.5% interest saved over 20 years on Rs. 6 L. Your effective principal reduces by this subsidy amount.
After this benefit is credited, your EMIs are calculated on the reduced principal, which lowers your overall repayment burden and interest outgo across the loan tenure. I hope this helps!
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How to Calculate Subsidy on Home Loan?
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2026-01-29T07:56:21+00:00 2026-02-02T10:54:00+00:00Comment
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