How much EMI can you actually afford on your salary?
Every answer online is a percentage: 30%, 40%, 50/30/20. All of them are guesses about a life they cannot see. What lenders actually check, where the rules of thumb come from, and how to work out your own number.
Ask this anywhere and you get a percentage back. Thirty per cent. Forty. Half your take-home. The 50/30/20 rule. Every one of them is confident and none of them knows anything about you.
They are not useless. They are just answering a different question from the one you asked.
What a lender actually checks
The figure that decides your loan is FOIR, fixed obligations to income ratio. Add up every fixed monthly commitment you already have, divide by monthly income, and that is the number underwriting looks at.
Indian lenders commonly cap total fixed obligations somewhere around 40 to 50% of income for a salaried applicant. That is their practice, not a law, and it varies by lender, by product and by how much they want the business.
Two things follow that most percentage answers skip:
- It is total obligations, not just the new one. An existing loan, a phone on instalments and a card you carry a balance on all sit in the same bucket.
- It is a ceiling for the lender, not a target for you. A lender is protecting its own recovery, not your ability to have a life. Approval and affordability are different questions, and only one of them is being answered when a bank says yes.
Where the rules of thumb come from
The 50/30/20 split is from All Your Worth, published in 2005 by Elizabeth Warren and Amelia Warren Tyagi. Half your after-tax income to needs, 30% to wants, 20% to savings and debt repayment.
Two details get dropped in most retellings. It is after-tax income, not CTC and not gross. And “savings and debt” are one bucket, so a household clearing a loan is doing the third thing, not failing at it.
The rule assumes housing is one line inside a needs bucket that also holds food, transport, utilities and insurance. That works when rent is 20 to 25% of take-home. On a first-job salary in Bengaluru, Mumbai or the Delhi NCR, rent alone frequently reaches 35 to 45%, which leaves the entire rest of the needs bucket about 10 percentage points to fit into. It does not fit. Nothing about the household is irresponsible; the ratio was simply not built on these housing costs.
There is a smaller difference too. A slice of what a salaried employee in India saves is not a decision at all, because the provident fund deduction happens before the money arrives. Whether that belongs in the 20% is a definitional question the rule never had to answer.
The question that does have an answer
Not “what percentage is safe” but: after this specific commitment, what is left, and what share of the month has it taken?
That is arithmetic, and it is the same arithmetic whatever framework you have read about.
What no ratio can see
A ratio looks at one month. It does not know how many months of expenses you already have set aside, how stable the income is, whether anyone depends on it, or what happens if the job ends in March.
Two people with an identical 40% can be in completely different positions, and no percentage separates them. That is why the tool above reports a ratio and a remainder and then stops. It can see your two numbers and it cannot see any of the rest, and turning that into a verdict would be pretending to knowledge nobody here has.
The comparison worth making is against yourself over time. What the ratio is at today’s commitments, and what it becomes after a rent renewal or a second loan. That one you can actually act on.