Well here is how you calculate it (in general), Take Your Total taxable income (13L) - the standard deductible (1.5L) that differs per family conditions etc. reduce the Interest component of your loan from that, what ever remains will be your taxable income. e.g., you take out 18L for 1 years at a rate of 10.5% (Fixed) , which makes your interest to be 1.86 L for first year and then going down afterwards, so it is 13L-1.5L-1.86L=9.64, so your taxable income now will be 9.64 L and your tax would be around 2-3 lakhs.