Tax hack: How a small investment tweak cut Rs 65 lakh off a Rs 1 crore home loan

Most people believe financial planning is all about SIPs, insurance policies, and chasing tax-saving instruments. But sometimes, the biggest savings don’t come from the “usual suspects” at all—they happen in one single big decision. Chartered Accountant Nitin Kaushik shared an example of how one of his clients saved a whopping ₹65 lakhs on a ₹1 crore home loan, simply by rethinking the structure of his down payment and loan.

Ca Kaushik elaborated that the client’s dream was straightforward: buy a house worth Rs 1 crore. 

His “safe” plan looked like this:

Down payment: Rs 50 lakh

Loan: Rs 50 lakh @ 8% for 25 years

EMI: Rs 38,591 per month

Total cost over tenure: Rs 1.65 crore

At first glance, this seemed smart—reducing the loan amount and monthly EMI looks like the safer choice. But the problem? The large down payment of Rs 50 lakh locks away capital that could otherwise have been invested to grow. This is the hidden opportunity cost most homebuyers ignore.

Alternative plan

Kaushik suggested a different approach. Instead of pouring Rs 50 lakh into the down payment, the client would put in only Rs 20 lakh upfront. The balance Rs 30 lakh would be invested in equity mutual funds using a Systematic Withdrawal Plan (SWP).

The numbers looked like this:

Down payment: Rs 20 lakh

Loan: Rs 80 lakh @ 8% for 25 years

EMI: Rs 61,745 per month

Initially, this higher EMI looked intimidating. But the invested ₹30 lakh corpus provided support. By withdrawing ₹25,000 per month via SWP, the effective EMI burden dropped to about Rs 36,745—very close to the “safe plan.”

The tax hack

Fast-forward 25 years:

The home loan was fully repaid.

The SWP-funded mutual fund corpus, even after monthly withdrawals, grew to Rs 1.40 crore.

Total cash outflow over 25 years was about Rs 2.05 crore.

After adjusting for the investment corpus, the net effective cost of the house came to just Rs 65 lakh.

In comparison, under the previous “safe plan,” the client would have paid a net cost of Rs 1.65 crore. The smarter allocation saved him Rs 65 lakh, without earning a single extra rupee of income.

Things to note

Of course, this strategy isn’t without risks. Kaushik pointed out a few important caveats:

Historical equity returns of 12–15% CAGR are not guaranteed and are subject to market volatility.

SWP withdrawals may attract capital gains tax, which can lower overall returns.

Home loan tax benefits under Sections 80C and 24(b) can further reduce the effective cost of borrowing but were not factored into this example.

This approach is most suitable for disciplined, long-term investors who have stable cash flows and the risk appetite to withstand market-linked fluctuations.

Financial planning isn’t just about cutting down on coffee bills or chasing small tax deductions. It’s about structuring big-ticket decisions smartly. For this client, rethinking the down payment and using investments strategically turned debt into a wealth-building tool. As Kaushik concluded: “My client didn’t earn extra. He just thought differently. And that mindset saved him Rs 65 lakh.”