Quick Answer: Business loan EMI = P × r × (1+r)^n / [(1+r)^n – 1], where P = principal, r = monthly interest rate (annual rate ÷ 12), n = tenure in months. A ₹50L business loan at 14% p.a. for 5 years has an EMI of approximately ₹1,16,300 per month. Total interest paid = ₹19.78L. Business loan interest is fully tax-deductible as a business expense.
Business Loan EMI — What Every Entrepreneur Should Know
A business loan EMI (Equated Monthly Instalment) consists of two parts: interest on the outstanding principal, and a portion of the principal itself. In the early years, more of the EMI goes towards interest; in later years, more goes towards repaying the principal.
EMI Formula
EMI = P × r × (1+r)^n / ((1+r)^n - 1)
Where: P = Loan Principal, r = Monthly Interest Rate (Annual Rate / 12 / 100), n = Loan Tenure in Months
Frequently Asked Questions
Yes. Interest paid on a loan taken for business purposes is fully deductible as a business expense under Section 37(1). Only interest qualifies — principal repayment does not. Keep loan account statements and interest certificates as evidence.
EMI is fixed throughout the loan. Monthly interest is the interest charged on the outstanding principal for that month. In month 1, almost all of the EMI is interest. By the last month, almost all is principal. This is the reducing balance method.