House to rent_or_ buy

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House to rent_or_ buy

  1. 1. www.finerva.com | support@finerva.com | +91-9787-11-11-66 My HOUSE Rent or Buy?
  2. 2. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Benefit on Buying House • Property value is appreciating • Property can be pledged to take loan latter • Pride of owning a house • Tax is saved on principal & interest • Rental income possible post retirement
  3. 3. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Tax benefit Under Rent – 40% of Basic Salary / HRA / Rent Paid in IN EXCESS OF 10 % basic - which ever is lowest – 50% of basic in case of metros Under Housing Loan – Tax Benefit on Principal (Amount Exempted)= Rs 100000 @30% – Tax Benefit on Interest (Amount Exempted) = 150000 @30%
  4. 4. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Benefit on Rented House • Amount saved can be invested at higher returns • Better life style, flexibility to spend and save. • Can switch to better locality and larger house based on salary increase • Tax saved on rent expense • Can buy house on down payment latter • No maintenance cost • There can be savings on difference between actual rent and HRA
  5. 5. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Min Max Min Max Min Max Min Max 850,000 2,000,000 3500 10000 8,126 19,120 10,319 24,280 Wealth Tax 1% 8,500 20,000 708 1,667 708 1,667 Maintenance Cost of Own House 1% 8,500 20,000 708 1,667 708 1,667 6,043 12,453 8,236 17,613 Yearly Payouts 42000 120000 114,512 249,440 132,328 311,360 72,512 149,440 98,828 211,360 2,104,445 4,337,051 8,017,104 17,145,902 Min Max 750 1500 100 500 344.0366972 3.5 10 956 1214 286800 18.55% Market returns on amount saved for respective periods Reference Amount Saved When Rented Amount Saved Yearly When Rented EMI/lakh Historical Market Retuns Sensex returns since 1969 is considered Rates Building Land Rent EMI 10 years EMI 15 yearsParticulars Area of house (sq feet) 1000 Build Rent
  6. 6. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Assumptions • House bought for own occupation • Amount saved are reinvested at market returns • Profile considered is that of a salaried employee • Down payment made for acquiring the house is not considered as it may be equal to deposit for the rented house
  7. 7. www.finerva.com | support@finerva.com | +91-9787-11-11-66 Assumptions… • Rent increase is not considered. Neither is the cost of increase in maintenance and increase in HRA. As these can be considered to be negated against each other • Interest rate risk is not considered • Market return risk is not considered as the terms (10 years , 15 years) are sufficiently long • Salary structure is considered to be flexible for tax planning
  8. 8. www.finerva.com | support@finerva.com | +91-9787-11-11-66

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