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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
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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%
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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
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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
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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
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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
