With the end of the fiscal year approaching, Indian homeowners inevitably face the question: Is it in your best interest to pay down your mortgage early? Recently, this discussion has had a new twist; generally, people think about the time of year rather than the numbers when deciding whether to pay off their home loans early. Borrowers that slow down, take their time calculating numbers, and place their focus on keeping their liquidity available often have an advantage compared to other borrowers.
As reported in the Hindustan Times, Rohit Nag of Kolkata has a ₹40 lakh mortgage and recently paid down ₹2 lakh before the end of the fiscal year to maximise his interest deduction under Section 24(b). By doing so, he was able to reduce the principal amount used to determine interest for the current fiscal year, allowing him to claim the full ₹2 lakh interest deduction available for that year. In dollar terms, a home loan of ₹40 lakh is approximately $44,320 (2026 mid-January rate of ₹90.25 = $1), and paying down ₹2 lakh will provide an additional interest deduction of about $2,216 (2026 mid-January rate of ₹90.25 = $1). These dollar amounts may be useful for readers that are considering their home loans in the U.S. dollar.
Advisers appearing in this article recommend that readers remain calm about this deadline. The cut-off at 31 March is only the time for accounting purposes and does not reflect the full interest that you have to pay back on your loan. Put simply, if you prepay back your loan in March, all interest reduces for this financial year; on the other hand, if you prepay back your loan in April, you would still save the same amount of interest over the life of the loan, but instead the tax deductibility of the interest will be recognised in the following financial year. In other words, most borrowers will want to consider cash flow (or when they want to use their excess cash) rather than deciding based solely on the fact that the calendar deadline is upon them.
When deciding when to prepay your loan, the general rules are straightforward and based on common sense: (1) maintain a minimum of six to nine months’ worth of living expenses in an emergency fund; (2) ensure you have not exhausted the limits for tax deductions under sections 80C and 24(b) of the Income Tax Act; and (3) assess your after-tax cost of borrowing in relation to the actual returns you can earn after taxes on your surplus capital invested elsewhere. If your expected after-tax returns from other sources are consistently less than your borrowing costs, prepaying (at least partially) will generally be a sound decision; otherwise, your focus should be on maintaining an adequate cash reserve and pursuing the best potential return for your money, even if in some cases that may be at the expense of an earlier payoff date.
Here are some notable points regarding prepayments: For starters, making partial payments usually means that a borrower benefits immediately from reduced repayments (i.e., reduced EMI or tenure) and does not have to worry about being cash-strapped at the same time.
By providing a borrower with a lump sum that decreases either their repayment amount or their repayment period, the lender reduces the amount of interest to be paid while at the same time leaving a sizeable amount of cash available in the bank for other expenses and investments.
Furthermore, there’s an important interplay between limits imposed by tax; if a borrower has already reached the limit of allowable interest and principal deductions for the year, then there is no additional benefit to making an extra repayment — the borrower will only reduce their future interest expenses. This is often a significant point of concern for borrowers who are counting on being able to claim additional deductions for their extra repayments made towards the end of the year.
Finally, macroeconomic conditions can be significant in terms of future opportunity costs associated with prepayment; for example, fluctuations in currency values and major market disturbances early in January of 2026 have created an unpredictable environment for returns on investment both from foreign currency exchange and from domestic equity markets, and therefore prepayment decisions should be made based on liquid safety net buffers rather than specific dates, and in times of high volatility, the benefits of holding cash or instruments with guaranteed liquidity will outweigh the speculative opportunities for profit.
Make decisions based on the financial patterns presented by the calendar, but don’t make decisions based on the patterns presented by the financial calendar. Use the intention to check and review your financial statements on March 31, not to withdraw all your cash from your financial institutions. Build an emergency fund, understand what tax planning tools you have available to you, analyse what your after-tax costs of your loans are compared to what you expect to earn on investments, and if you are able to utilise partial prepayment plans to help you out without jeopardising your financial future, then utilise partial prepayment plans. In most instances with a clear and present head on your shoulders, when compared to when you’re panicked, you will realize greater long-term gains.
