Principal Amount

Definition

Principal is the original amount of money borrowed in a loan or invested in a financial product. In loans, the principal decreases over time as payments are made, with each payment splitting between interest and principal reduction (amortization). In investments, the principal is the initial amount invested, and returns are calculated based on this base amount. For home loans in India, the principal can range from Rs 5 lakh to several crores. Under Section 80C, principal repayment of home loans up to Rs 1.5 lakh is tax-deductible.