What is PMEGP and how does this calculator work?
The Prime Minister's Employment Generation Programme (PMEGP) is a credit-linked subsidy scheme run by the Ministry of Micro, Small & Medium Enterprises and implemented through KVIC and state nodal agencies. It helps you set up a new micro-enterprise by giving you a margin-money subsidy that reduces the amount of your own money you need to invest. Your bank lends the rest as a term loan, and the subsidy is paid by the government into that loan account.
This PMEGP calculator works out the complete funding picture of your project: the government subsidy you can expect, the own contribution you must bring in, the exact bank loan amount and the monthly EMI you will repay on it. It follows the same logic as the official government calculator, and it adds an 'after-subsidy' view that shows how much lower your EMI would be if the subsidy were treated as an up-front payment.
Government subsidy rates for PMEGP (2026)
- General category: 25% of the project cost in rural areas and 15% in urban areas.
- Special categories (SC, ST, OBC, Minority, Women, Transgender, PwD, Ex-servicemen, NER, Hill & Border, Aspirational and LWE districts): 35% in rural areas and 25% in urban areas.
The subsidy or margin money is capped against the maximum eligible project cost of ₹50,00,000 for manufacturing units and ₹20,00,000 for service or trading units. If your project costs more than the cap, the excess is still financed by the bank, but it does not attract any subsidy.
Your own contribution (margin money)
You must bring in your own share before the bank disburses the loan. General applicants contribute 10% of the project cost, while women, SC, ST, OBC, Minority and other special-category applicants contribute only 5%. The bank finances the remaining 90% or 95%. This is one of the biggest advantages of PMEGP — even a first-time entrepreneur with limited savings can start with a relatively small own contribution.
Why are the EMI amounts different between the two views?
The official PMEGP approach keeps the subsidy in a separate bank account and adjusts it to the loan after the project is commissioned — typically after the 3-year lock-in period. During this period you repay the full loan, so the EMI is calculated on the entire bank loan. The 'After Subsidy' view instead deducts the subsidy from the principal straight away, which gives you the EMI you could achieve if the margin money were released up front. Both numbers are useful: the first is what the bank will actually demand at the start, and the second shows the true benefit the subsidy delivers over the life of the loan.
Use the golden example to check your numbers
Take a ₹20,00,000 service project in a rural area by a woman from a special category at 11% interest for 7 years. The subsidy is 35% × ₹20,00,000 = ₹7,00,000 and the own contribution is 5% = ₹1,00,000. The bank loan is ₹19,00,000 and the monthly EMI is about ₹32,500. If the ₹7,00,000 subsidy were applied up front, the repayable principal would drop to ₹12,00,000 and the EMI would fall to about ₹20,800. That is a saving of roughly ₹11,000 every month during the term of the loan.
Working capital under PMEGP
PMEGP also supports a portion of working capital for the initial months. Working capital is generally limited to 40% of the eligible project cost for manufacturing units and 60% for trading units. The official scheme includes a bit of working capital inside the project cost when a bank recommends it, which is one reason to prepare your project report carefully before applying.
Subsidy lock-in and release
The subsidy is kept in a separate bank account and can be adjusted to the loan only after the project goes into production, the unit sustains for at least 3 years, the EDP (Entrepreneurship Development Programme) training is completed, and the implementing agency verifies the unit is functioning. If the unit fails to operate, the subsidy may be collected back by the government.
Collateral and CGTMSE cover
Loans up to ₹10,00,000 under PMEGP are collateral-free under the RBI's priority-sector norms. For loans above that, the CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises) provides a guarantee to the bank, which removes the need for a separate collateral property. The guarantee covers 75% of the covered loan (85% for women, SC/ST and NER units) up to a maximum guaranteeable loan of ₹25,00,000. The bank in turn pays an annual guarantee fee, typically 0.37%–0.5% of the covered amount, which is charged to you as part of the loan cost — the calculator gives you an estimate of this first-year fee.
Who is eligible for PMEGP?
- Any individual aged 18 or above, with at least Class-VIII pass for projects above ₹10 lakh (manufacturing) or ₹5 lakh (service).
- New start-up units only — the scheme is meant for first-time entrepreneurs.
- One loan per family, subject to the family-income ceiling and district-wise limits.
- Self-Help Groups (including those under the National Rural Livelihoods Mission) and institutions registered under the Societies, Cooperative or Trust laws are also eligible.
How to apply for PMEGP
Apply online through the official portal (pmegp.msme.gov.in) using your Aadhaar and bank details. Prepare a brief project report covering land, machinery, technology, working capital and market. The application goes to the DIC (District Industries Centre) or KVIC, which appraises and recommends it to your bank. Once sanctioned, the bank releases the loan and the nodal agency deposits the subsidy amount into the loan account.
How to use this calculator to plan
- Enter the total Project Cost of your new unit (plant & machinery, equipment and initial working capital).
- Choose your Sector — manufacturing or service/trading — because the project cap and subsidy ceiling differ.
- Select your Social Category and Special Category Group to apply the correct subsidy rate and own-contribution percentage. Women and Transgender are automatically treated as special category.
- Set the Location (rural or urban) — rural projects attract a 10-point higher subsidy rate.
- Enter the Interest Rate expected by your bank and the Tenure in years.
- Switch between Official (subsidy kept aside, matching the government calculator) and After Subsidy to compare your monthly EMI under both approaches.
Review the donut showing how your project cost is split between the government subsidy, your own contribution and the bank loan, the repayment schedule and the year-by-year chart of balance, principal and interest. When you approach your bank, the sanction figure you negotiate will land between the official and after-subsidy EMI, depending on when the subsidy is adjusted.
Disclaimer
All figures produced by this calculator are indicative estimates for planning. Actual subsidy, interest rates, guarantee fees and loan terms are decided by the implementing agencies and individual banks. Always confirm with your nearest KVIC office, District Industries Centre and your bank before applying.