EMI with a moratorium period: what a 6, 12 or 24 month moratorium costs, with interest paid or added to the loan

What a 6, 12 or 24 month moratorium costs

On a business loan of ₹ 1,20,00,000 at 12 percent a year, repaid by monthly EMI over 60 months after the moratorium, a moratorium whose interest is paid as it falls due costs its interest only payments: ₹ 7,20,000 over 6 months, ₹ 14,40,000 over 12 and ₹ 28,80,000 over 24, at ₹ 1,20,000 a month. Total interest rises by exactly that amount, and the EMI after the moratorium stays at ₹ 2,66,933, the EMI with no moratorium, because the loan is unchanged when repayment begins.

Where the interest is added to the loan instead, repayment runs on the larger balance. The interest added to the loan is then ₹ 7,38,242 over 6 months, ₹ 15,21,900 over 12 and ₹ 32,36,816 over 24, and the EMI rises to ₹ 2,83,355, ₹ 3,00,787 and ₹ 3,38,935. Total interest rises by more than the interest added, because the instalments after it carry interest on it too.

The cash falls at different times under the two treatments, so the totals alone do not rank them; the calculator prints the other treatment's total interest beside the one chosen and ranks neither. Read which treatment applies from the sanction letter.

The rule in plain words

A moratorium is the period after disbursement in which no principal is repaid. Interest runs from the month of disbursement all the same, so a moratorium defers principal, not the interest charge. A tenure is quoted both ways, including the moratorium and after it, so the calculator takes the two as separate inputs and prints the total: 12 months of moratorium and 60 of repayment is a 72 month loan.

Interest during the moratorium is treated one of two ways. Paid as it falls due: an interest only payment on the full principal in the month after each period, so the principal is unchanged when repayment begins. Added to the loan (capitalised): the interest for each period is debited to the loan in the month after that period and nothing is paid, so each later period charges interest on the interest already added.

Servicing is monthly or quarterly, and the calculator services the moratorium interest at the same frequency as the principal, at the annual rate divided by 12 or by 4. That is a convention of the calculator: a lender may compute interest on a daily balance or on another day count, and its figures will then differ. A quarterly loan needs whole quarters: a 5 month moratorium is refused, not rounded.

After the moratorium the loan is repaid by equated instalments, one level figure each period with principal and interest together, or by equal principal, the same principal each period with interest on the balance then outstanding, so the instalment falls over the term. Many term loan schedules in a project report take the second form.

Moratorium length and treatment, side by side

₹ 1,20,00,000 at 12 percent a year, disbursed in April 2026 and repaid by monthly EMI over 60 months after a moratorium of 0, 6, 12 or 24 months, its interest paid as it falls due or added to the loan.

The EMI is the calculator's figure to the nearest rupee, and the rest are rounded to the rupee from a schedule struck to the paisa. With no moratorium there is nothing to pay or to add to the loan, so one row serves both treatments.

Equated instalments against equal principal

One case, ₹ 1,20,00,000 at 12 percent with a 12 month moratorium whose interest is paid as it falls due and 60 months of repayment, serviced monthly and serviced quarterly.

Under equal principal the principal each period is the loan divided by the number of instalments, struck down to the paisa, and the last instalment takes the paise left over.

How the figures land by financial year

The monthly equated instalment case above, ₹ 1,20,00,000 at 12 percent disbursed in April 2026 with a 12 month moratorium whose interest is paid as it falls due, by financial year.

Interest accrued is for the months of the year; interest paid is in the payments falling due in it. At 31 March 2027, ₹ 1,20,000 of interest has run and falls due only in April 2027, so it is in interest accrued, not in interest paid, and the closing balance excludes it.

Conditions and edge cases

In a CMA or a project report the schedule by financial year gives three figures a year. Interest accrued is the accrual basis figure; whether it is charged to the projected profit and loss or added to the cost of an asset under construction is a question for the accounts, since the calculator shows what is debited to the loan and when, not how it is accounted for. Principal falling due is the year's repayment, and a DSCR working on the accrual basis reads it beside interest accrued, not interest paid.

Take each year's instalments from the schedule. In the table above, repayment starts in May 2027, so FY 2027-28 carries 11 instalments and ₹ 16,99,554 of principal, and the last instalment falls alone in FY 2032-33. A projection that puts twelve instalments in the first year of repayment will not tie to the schedule.

On the monthly case, equal principal instalments run from ₹ 3,20,000 down to ₹ 2,02,000 against a level EMI of ₹ 2,66,933, so the first year of repayment carries the heaviest payments, though total interest is lower because the balance falls faster. Quarterly servicing carries more interest than monthly, ₹ 55,71,770 against ₹ 54,56,002 by EMI, because the balance comes down once a quarter instead of every month.

Where the interest is added to the loan, it is accrued for the months it ran over, shown as added to the loan in the year it is debited, and then repaid as principal, so principal falling due in later years includes it. A working that takes interest accrued and principal falling due for every year must not count it twice, once as interest and again as principal. For the same reason total payment is the loan plus total interest, ₹ 1,80,47,232 on the 12 month case, not total interest plus the principal repaid.

A lender that accumulates moratorium interest without charging interest on it, in a separate funded interest account for instance, adds less than the calculator's capitalised figure, by the interest on interest. The calculator does not compute that variant, nor interest charged monthly where principal is repaid quarterly. It includes no broken period interest for the days between disbursement and the start of the first period; where a lender charges it, it is payable in addition to the schedule.

Tax year 2026-27 under the 2025 Act

Nothing in this method moves with the tax year. The calculator's basis is reducing balance amortisation after a moratorium, by equated instalments or by equal principal instalments, and it names no section of the Income-tax Act, 1961 or of the Income-tax Act, 2025, because it applies none. From 1 April 2026 the 2025 Act replaces the previous year and the assessment year with the tax year, so a project report for tax year 2026-27 carries the new name and the same schedule. The tax treatment of the interest is outside the calculator.

What the calculator does

The EMI calculator beside this guide takes the loan, the rate, the moratorium and the repayment period after it as separate inputs, and schedules the loan to the paisa by equated instalments or equal principal, monthly or quarterly, with the moratorium interest paid or added to the loan. It prints the schedule by calendar or financial year with interest paid and interest accrued. It leaves to the CA the sanction letter's own terms, broken period interest, fees, a floating rate, and where the interest goes in the accounts. Check the figure against the sanction letter and the lender's own repayment schedule before you rely on it or sign anything.