With the commencement of the festive season, e-commerce companies like Flipkart and Amazon are enticing shoppers with lucrative deals. Several retailers and e-commerce portals follow their footsteps and introduce various attractive schemes, discounts and cash-back offers around this time. A popular scheme catching the attention of buyers is 'no-cost EMI'.
What is a 'no-cost EMI' scheme?
"No-cost EMI schemes are loan offers in which buyer of the product or service just repays the selling price of the product in equal installments, without paying any interest on the loan. However, as RBI has prohibited lenders and card issuers from offering 0% interest loans, the interest component is actually subvented by manufacturer or merchant, either in the form of upfront discount or cashback to the buyer,” Naveen Kukreja, CEO & Co-founder, Paisabazaar.com, explained. The buyer, however, will have to pay tax charged on the interest amount.
So, under no-cost EMI scheme, the total amount paid by you to the EMI provider will be the price of the product split equally across the EMI tenure. The interest payable to the bank will be offered as an upfront discount during checkout, effectively giving you the benefit of No Cost EMI. You might think this as a best deal while buying it but let’s understand math behind it before you opt