Processing fees, GST and lost upfront discounts can turn a seemingly interest-free purchase into a more expensive one, but instalments may still make sense when preserving an emergency cash buffer matters more.
When a retailer offers a no-cost EMI, the real question is not whether the monthly payment looks smaller, but whether the purchase is actually cheaper once every charge is counted. Kundan Shahi, founder and chief executive of Zavo, and chartered accountant Rohit Saluja say buyers should judge the final amount payable, not the instalment label, because processing charges, goods and services tax on those charges and any discount surrendered for choosing instalments can quickly change the maths.
The simplest way to test the offer is to compare the total cost under both options. Saluja’s smartphone example shows why. On a handset priced at ₹60,000, a no-cost EMI that carries a ₹500 processing fee plus GST, while also causing the buyer to lose a ₹3,000 upfront discount, can raise the effective cost to ₹60,590. Paying in full, by contrast, would cost ₹57,000, creating a gap of ₹3,590. Business Today’s report, like similar consumer-finance explainers elsewhere, underscores that the instalment plan may look painless at checkout but still leave the customer paying more overall.
That does not mean no-cost EMI is always a bad deal. It can make sense when the headline price is the same either way, the fees are modest and the buyer has a clear reason to keep cash on hand. Shahi says the arrangement may work if the return from holding the money outweighs the financing costs. In practice, that could mean keeping funds in a savings account, or preserving the money for a short-term investment, but only if the expected return genuinely exceeds the extra expense of the EMI. Market-linked gains are not guaranteed, and any tax due on investment returns should be folded into the comparison.
For many households, the strongest argument for instalments is liquidity, not profit. Keeping a cash buffer for medical bills, job loss or another emergency can be more valuable than squeezing out a small upfront discount. But that same logic cuts both ways: buyers should not pile on EMIs simply because the monthly amount seems manageable. Several instalment plans can strain credit availability and leave less room for essentials, savings and other commitments. Before signing up, consumers should check the total payable amount, the tenure, processing fees, any foreclosure charge, penalties for missed payments and whether the offer is tied to a specific card or excludes a discount available on immediate payment.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
