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Home Loan vs Rent – Now With PMAY & Tax Benefits, It’s a No-brainer!
Last Updated : Oct. 3, 2017, 8:07 p.m.
For years, buying a home or living on rent has remained a hot debate. The debate, however, goes in favour of the former given the recent developments around. First, Home Loans are readily available across the lenders at affordable Interest Rates. And with the advent of Pradhan Mantri Awas Yojana (PMAY), buying a home has become a no-brainer. The tax benefits and interest concession make home buying a much more attractive option than before.
Let’s Do The Math
What tilts the game in favour of home loans is the fact that interest rates have slipped to as low as 8.35% per annum, giving you the much-needed relief in times of inflation and allowing you to spend on other needs. With the falling rates, the calculation says that home loan borrowers are expected to save much more than their rent paying counterparts. So, let’s check out the calculations without much ado.
Table Showing the Comparison Between Home Loan and Rent
| Eyeball Grabbers | Home Loan | Rent |
|---|---|---|
| Tax Benefits | Yes, Under Section 24 and 80C of the Income Tax Act | - |
| Interest Subsidy | Available Under PMAY Scheme | - |
| Costs | Down with Falling Rates, Interest Subsidy and Other Developments | May Double That of Home Loan Over 20 Years |
| Convenience | Assured of Permanent Stay, Convenience and Other Privileges | Hassles of Shifting All the Time |
| Other Benefits | EMI Repayment and Tax Benefit Sharable Among Co-owners of the Property. | - |
Costs of Home Loan
Get started by calculating the feasibility of a 20-year home loan of say ₹40 lakhs at an interest rate of 8.60% per annum on your budget. For a better view of the cost, you can check out the table below.
| Costs | Amount (In ₹) |
|---|---|
| EMI | 34967 |
| Interest Outgo | 43,91,962 |
| Total Outgo | 83,91,962 |
| One-time Processing Fee Including GST | 11,800 (Approx.) |
| Overall Loan Cost | 84,03,762 |
CLSS PMAY Benefits of Home Loan
The annual remuneration would amount to ₹7,80,000, considering your assumed monthly income of ₹65,000 (65,000 x 12). With that, you come under Credit Linked Subsidy Scheme (CLSS) Middle Income Group (MIG)-1, which enlists borrowers with an annual income of more than 6 lakhs-12 lakhs. The interest subsidy will work out to be 4% on a loan amount of first ₹9 lakhs, while the remaining portion of the debt to be serviced at the normal rate of interest. However, the subsidy amount is not arrived by subtracting the loan at the subsidized rate from the actual one. In fact, it is the net present value (NPV) of the subsidy amount. The calculation of NPV would be made at a discounted rate of 9%. The NPV of the interest subsidy thus comes out to be ₹2,35,000. Check out the table below showing the savings on your proposed home loan on PMAY CLSS .
| Particulars | Amount (In ₹) |
|---|---|
| Loan Amount (A) | 40,00,000 |
| Interest Subsidy Amount) B) | 2,35,000 |
| Balance Loan Amount (A-B) | 37,65,000 |
| EMI After Subsidy | 32912 |
| Interest Outgo After Availing Subsidy Benefits | 41,33,935 |
| Total Amount Payable After Subsidy | 78,98,935 |
Savings on CLSS PMAY
You can thus generate a savings of ₹5,04,827 (84,03,762-78,98,935) while picking a PMAY-backed home loan over loans without the freebies of subsidy.
Note – PMAY CLSS scheme expired on March 31, 2022
Income Tax Benefits Make Home Loans Even More Compelling
As per the existing rules, the maximum tax deduction on the interest repayment of a home loan is up to ₹2 lakhs, while for principal it is ₹1.5 lakh. So, the amount of tax deduction will be reduced from your annual gross income and on the resultant sum, the tax will be calculated as per the slab you belong to.
| Year | Actual Principal Repayment Without CLSS | Actual Interest Repayment Without CLSS | Actual Principal Repayment with CLSS | Actual Interest Repayment with CLSS | Tax Deduction on Principal Without CLSS | Tax Deduction on Interest Without CLSS | Tax Deduction on Principal with CLSS | Tax Deduction on Interest with CLSS |
|---|---|---|---|---|---|---|---|---|
| 1 | 78,650 | 3,40,948 | 86,795 | 3,08,148 | 78,650 | 2,00,000 | 86,795 | 2,00,000 |
| 2 | 85,687 | 3,33,911 | 93,794 | 3,01,150 | 85,687 | 2,00,000 | 93,794 | 2,00,000 |
| 3 | 93,353 | 3,26,244 | 1,01,357 | 2,93,586 | 93353 | 2,00,000 | 1,01,357 | 2,00,000 |
| 4 | 1,01,706 | 3,17,892 | 1,09,530 | 2,85,413 | 1,01,706 | 2,00,000 | 1,09,530 | 2,00,000 |
| 5 | 1,10,806 | 3,08,792 | 1,18,362 | 2,76,581 | 1,10,806 | 2,00,000 | 1,18,362 | 2,00,000 |
| 6 | 1,20,720 | 2,98,878 | 1,27,906 | 2,67,037 | 1,20,720 | 2,00,000 | 1,27,906 | 2,00,000 |
| 7 | 1,31,521 | 2,88,077 | 1,38,220 | 2,56,723 | 1,31,521 | 2,00,000 | 1,38,220 | 2,00,000 |
| 8 | 1,43,289 | 2,76,309 | 1,49,366 | 2,45,578 | 1,43,289 | 2,00,000 | 1,49,366 | 2,00,000 |
| 9 | 1,56,109 | 2,63,489 | 1,61,410 | 2,33,534 | 1,50,000 | 2,00,000 | 1,50,000 | 2,00,000 |
| 10 | 1,70,076 | 2,49,521 | 1,74,425 | 2,20,519 | 1,50,000 | 2,00,000 | 1,50,000 | 2,00,000 |
| 11 | 1,85,294 | 2,34,304 | 1,88,490 | 2,06,454 | 1,50,000 | 2,00,000 | 1,50,000 | 2,00,000 |
| 12 | 2,01,872 | 2,17,725 | 2,03,689 | 1,91,255 | 1,50,000 | 2,00,000 | 1,50,000 | 1,91,255 |
| 13 | 2,19,934 | 1,99,663 | 2,20,113 | 1,74,830 | 1,50,000 | 1,99,663 | 1,50,000 | 1,74,830 |
| 14 | 2,39,612 | 1,79,985 | 2,37,862 | 1,57,081 | 1,50,000 | 1,79,985 | 1,50,000 | 1,57,081 |
| 15 | 2,61,051 | 1,58,547 | 2,57,042 | 1,37,901 | 1,50,000 | 1,58,547 | 1,50,000 | 1,37,901 |
| 16 | 2,84,408 | 1,35,190 | 2,77,769 | 1,17,175 | 1,50,000 | 1,35,190 | 1,50,000 | 1,17,175 |
| 17 | 3,09,854 | 1,09,743 | 3,00,167 | 94,777 | 1,50,000 | 1,09,743 | 1,50,000 | 94,777 |
| 18 | 3,37,578 | 82,020 | 3,24,371 | 70,573 | 1,50,000 | 82,020 | 1,50,000 | 70,573 |
| 19 | 3,67,782 | 51,816 | 3,50,527 | 44,417 | 1,50,000 | 51,816 | 1,50,000 | 44,417 |
| 20 | 4,00,937 | 18,910 | 3,79,004 | 16,152 | 1,50,000 | 18,910 | 1,50,000 | 16,152 |
| Total | 40,00,239 | 43,91962 | 40,00,239 | 41,33,935 | 26,65,732 | 33,35,874 | 27,25,330 | 32,04,161 |
Thus, you can receive a tax deduction of ₹26,65,732 and ₹33,35,874 in principal and interest repayments, respectively, without CLSS. While with the CLSS, the tax deduction goes to ₹27,25,330 in principal repayment and 32,041,61 in interest repayment on the said loan.
Note – Tax deductions, however, can vary over the years as the government may change the claim limits during the budget of a financial year.
How Would These Tax Deductions Pan Out?
Your annual salary would rise to ₹47.70 lakhs (approx.) over 20 years from ₹7,80,000 at present, taking into account 10% appreciation in the emolument each year.
| Year | Annual Salary (In ₹) | Taxable Income ( Gross Annual Income-Tax Deduction) Without CLSS (In ₹) | Taxable Income ( Gross Annual Income-Tax Deduction) with CLSS (In ₹) | Normal Tax Liability | Tax Savings on Home Loan Without CLSS | Tax Savings on Home Loan With CLSS |
|---|---|---|---|---|---|---|
| 1 | 7,80,000 | 2,51,350 | NIL | Upto 2.5 Lakhs - NIL Above 2.5-5 Lakhs - 5% of 2.5 Lakhs - 12,500 Above 5-7.8 Lakhs - 20% of 2.8 lakhs - 56,000 Tax Liability - 68,500 | Upto 2.5 Lakhs - NIL Tax Deduction - 2,78,650 Total Tax Deduction - 5,28,650 Taxable Income - 7,80,000-5,28,650=2,51,350 5% of 2.5 lakhs - 12,500 20% of 1,350 = 270 Total Tax Liability = 12,770 Tax Savings = 68,500-12,770= 55,730 | Upto 2.5 Lakhs - NIL Tax Deduction - 2,86,795 Total Tax Deduction - 5,36,795 Taxable Income - 7,80,000-5,36,795=2,43,205 Total Tax Liability = NIL Tax Savings = 68,500 |
| 2 | 8,58,000 | 3,22,313 | 3,14,206 | Upto 2.5 Lakhs - NIL Above 2.5-5 Lakhs - 5% of 2.5 Lakhs - 12,500 Above 5-8.58 Lakhs - (20% of 3.58 lakhs =71,600) Tax Liability - 84,100 | Upto 2.5 Lakhs - NIL Tax Deduction - 2,85,687 Total Tax Deduction (2,50,000+2,85,687 =5,35,687) Taxable Income (8,58,000-5,35,687 =3,22,313) 5% of 2.5 lakhs - 12,500 20% of 72,313 =14,462.60 Total Tax Liability =26,962.60 Tax Savings = (84,100-26,962.60=57,137.66) | Upto 2.5 Lakhs - NIL Tax Deduction - 2,93,794 Total Tax Deduction -2,50,000+2,93,794 = 5,43,794 Taxable Income (8,58,000-5,43,794= 3,14,206) 5% of 2.5 lakhs - 12,500 20% of 64,206 =12,841.20 Total Tax Liability = 25,341.20 Tax Savings = (84,100-25,341.20=58,658.80) |
| 3 | 9,43,800 | 4,00,447 | 3,92,443 | Upto 2.5 Lakhs - NIL Above 2.5-5 Lakhs - 5% of 2.5 Lakhs - 12,500 Above 5-9.43 lakhs 20% of 4.438 lakhs=88,760 Tax Liability = 1,01,260 | Upto 2.5 Lakhs - NIL Tax Deduction - 2,93,353 Total Tax Deduction (2,50,000+2,93,353 =5,43,353) Taxable Income (9,43,800-5,43,353 =4,00,447) 5% of 2,50,000=12,500 20% of 1,50,447=30,089.40 Total Tax Liability = 42,589.40 Tax Savings (1,01,260-42,589.40= 58,670.60) | Upto 2.5 Lakhs - NIL Tax Deduction - 3,01,357 Total Tax Deduction (2,50,000+3,01,357 =5,51,357) Taxable Income (9,43,800-5,51,357 =3,92,443) 5% of 2,50,000=12,500 20% of 1,42,443=28,488.60 Total Tax Liability = 40,988.60 Tax Savings (1,01,260-40,988.60=60,271.40) |
| 4 | 10,38,180 | 4,86,474 | 4,78,650 | Upto 2.5 Lakhs - NIL Above 2.5-5 Lakhs - 5% of 2.5 Lakhs - 12,500 Above 5-10 lakhs-20% of 5 lakhs-1,00,000 30% on remaining 38,180 = 11,454 Total Tax Liability = 1,23,954 | Upto 2.5 Lakhs - NIL Tax Deduction -3,01,706 Total Tax Deduction (2,50,000+3,01,706 =5,51,706) Taxable Income (10,38,180-5,51,706 =4,86,474) 5% of 2,50,000 =12,500 20% of 2,36,474 =47,294.80 Total Tax Liability = 59,794.80 Tax Savings (1,23,954-59,794.80= 64,159.20) | Upto 2.5 Lakhs - NIL Tax Deduction -3,09,530 Total Tax Deduction (2,50,000+3,09,530 =5,59,530) Taxable Income (10,38,180-5,59,530 =4,78,650) 5% of 2,50,000 =12,500 20% of 2,28,650 =45,730 Total Tax Liability = 58,230 Tax Savings (1,23,954-58,230= 65,724) |
| 5 | 11,41,998 | 5,81,192 | 5,73,636 | Upto 2.5 Lakhs - NIL Above 2.5-5 Lakhs - 5% of 2.5 Lakhs - 12,500 Above 5-10 lakhs-20% of 5 lakhs-1,00,000 30% on remaining 1,41,998 = 42,559.40 Total Tax Liability = 1,55,059.40 | Upto 2.5 Lakhs - NIL Tax Deduction -3,10,806 Total Tax Deduction (2,50,000+3,10,806 =5,60,806) Taxable Income (11,41,998-5,60,806 =5,81,192) 5% of 2,50,000 =12,500 20% of 3,31,192 =66,238.40 Total Tax Liability = 78,738.40 Tax Savings (1,55,059.40 -78,738.40= 76,321) | Upto 2.5 Lakhs - NIL Tax Deduction -3,18,362 Total Tax Deduction (2,50,000+3,18,362 =5,68,362) Taxable Income (11,41,998-5,68,362 =5,73,636) 5% of 2,50,000 =12,500 20% of 3,23,636 =64,727.20 Total Tax Liability = 77,227.20 Tax Savings (1,55,059.40 -77,227.20= 77,832.20) |
| 6 | 12,56,197.80 | 6,85,477.80 | 6,78,291.80 | Upto 2.5 Lakhs - NIL Above 2.5-5 Lakhs - 5% of 2.5 Lakhs - 12,500 Above 5-10 lakhs-20% of 5 lakhs-1,00,000 30% on remaining 2,56,197.80 = 76,859.34 Total Tax Liability = 1,89,359.34 | Upto 2.5 Lakhs - NIL Tax Deduction -3,20,720 Total Tax Deduction (2,50,000+3,20,720 =5,70,720) Taxable Income (12,56,197.80-5,70,720 =6,85,477.80) 5% of 2,50,000 =12,500 20% of 4,35,477 =87,095.40 Total Tax Liability = 99,595.40 Tax Savings (1,89,359.34-99,595.40 = 89,763.94) | Upto 2.5 Lakhs - NIL Tax Deduction -3,27,906 Total Tax Deduction (2,50,000+3,27,906 =5,77,906) Taxable Income (12,56,197.80-5,77,906 =6,78,291.80) 5% of 2,50,000 =12,500 20% of 4,28,291 =85,658.20 Total Tax Liability = 98,158.20 Tax Savings (1,89,359.34-98,158.20 = 91,201.14) |
| 7 | 13,81,817.58 | 8,00,296.58 | 7,93,597.58 | Upto 2.5 Lakhs - NIL Above 2.5-5 Lakhs - 5% of 2.5 Lakhs - 12,500 Above 5-10 lakhs-20% of 5 lakhs-1,00,000 30% on remaining 3,81,817.58 = 1,14,545.274 Total Tax Liability = 2,27,045.27 | Upto 2.5 Lakhs - NIL Tax Deduction -3,31,521 Total Tax Deduction (2,50,000+3,31,521 =5,81,521) Taxable Income (13,81,817.58-5,70,720 =8,00,296.58) 5% of 2,50,000 =12,500 20% of 5,00,000 =1,00,000 30% on remaining 50,296.58=15,088.97 Total Tax Liability = 1,27,588.97 Tax Savings (2,27,045.27-1,27,588.97 = 99,456.30) | Upto 2.5 Lakhs - NIL Tax Deduction -3,38,220 Total Tax Deduction (2,50,000+3,38,220 =5,88,220) Taxable Income (13,81,817.58-5,88,220 =7,93,597.58) 5% of 2,50,000 =12,500 20% of 5,00,000 =1,00,000 30% on remaining 43,597.58=13,079.27 Total Tax Liability = 1,25,579.27 Tax Savings (2,27,045.27-1,25,579.27 = 1,01,466) |
| 8 | 15,19,999.34 | 9,26,710.34 | 9,20,633.34 | Upto 2.5 Lakhs - NIL Above 2.5-5 Lakhs - 5% of 2.5 Lakhs - 12,500 Above 5-10 lakhs-20% of 5 lakhs-1,00,000 30% on remaining 5,19,599.34= 1,55,99.80 Total Tax Liability = 2,68,499.80 | Upto 2.5 Lakhs - NIL Tax Deduction -3,43,289 Total Tax Deduction (2,50,000+3,43,289 =5,93,289) Taxable Income (15,19,999.34-5,93,289 =9,26,710.34) 5% of 2,50,000 =12,500 20% of 5,00,000 =1,00,000 30% on remaining 1,76,710.34=53,013.10 Total Tax Liability = 1,65,513.10 Tax Savings (2,68,499.80-1,65,513.10 = 1,02,986.70 | Upto 2.5 Lakhs - NIL Tax Deduction -3,49,366 Total Tax Deduction (2,50,000+3,49,366 =5,99,366) Taxable Income (15,19,999.34-5,99,366 =9,20,633.34) 5% of 2,50,000 =12,500 20% of 5,00,000 =1,00,000 30% on remaining 1,70,633.34=51,190 Total Tax Liability = 1,63,690 Tax Savings (2,68,499.80-1,63,690 = 1,04,809.80) |
| 9 | 16,71,999.27 | 6,00,000 | 6,00,000 | Upto 2.5 Lakhs - NIL Above 2.5-5 Lakhs - 5% of 2.5 Lakhs - 12,500 Above 5-10 lakhs-20% of 5 lakhs-1,00,000 30% on remaining 6,71,999.27= 2,01,599.78 Total Tax Liability = 3,14,099.78 | Upto 2.5 Lakhs - NIL Tax Deduction -3,50,000 Total Tax Deduction (2,50,000+3,50,000 =6,00,000) Taxable Income (16,71,999.27-6,00,000 =10,71,999.27) 5% of 2,50,000 =12,500 20% of 5,00,000 =1,00,000 30% on remaining 3,21,999.27=96,599.78 Total Tax Liability = 2,09,099.78 Tax Savings (3,14,099.78-2,09,099.78 = 1,05,000 | Upto 2.5 Lakhs - NIL Tax Deduction -3,50,000 Total Tax Deduction (2,50,000+3,50,000 =6,00,000) Taxable Income (16,71,999.27-6,00,000 =10,71,999.27) 5% of 2,50,000 =12,500 20% of 5,00,000 =1,00,000 30% on remaining 3,21,999.27=96,599.78 Total Tax Liability = 2,09,099.78 Tax Savings (3,14,099.78-2,09,099.78 = 1,05,000 |
| 10 | 18,39,199.20 | 12,39,199.20 | 12,39,199.20 | Upto 2.5 Lakhs - NIL Above 2.5-5 Lakhs - 5% of 2.5 Lakhs - 12,500 Above 5-10 lakhs-20% of 5 lakhs-1,00,000 30% on remaining 8,39,199.20= 2,51,759.76 Total Tax Liability = 3,64,259.76 | Upto 2.5 Lakhs - NIL Tax Deduction -3,50,000 Total Tax Deduction (2,50,000+3,50,000 =6,00,000) Taxable Income (18,39,199.20-6,00,000 =12,39,199.20) 5% of 2,50,000 =12,500 20% of 5,00,000 =1,00,000 30% on remaining 4,89,199.20=1,46,759.76 Total Tax Liability = 2,59,259.76 Tax Savings (3,64,259.76-2,59,259.76 = 1,05,000 | Upto 2.5 Lakhs - NIL Tax Deduction -3,50,000 Total Tax Deduction (2,50,000+3,50,000 =6,00,000) Taxable Income (18,39,199.20-6,00,000 =12,39,199.20) 5% of 2,50,000 =12,500 20% of 5,00,000 =1,00,000 30% on remaining 4,89,199.20=1,46,759.76 Total Tax Liability = 2,59,259.76 Tax Savings (3,64,259.76-2,59,259.76 = 1,05,000 |
| 11 | 20,23,119.12 | 14,23,119.20 | 14,23,119.20 | Upto 2.5 Lakhs - NIL Above 2.5-5 Lakhs - 5% of 2.5 Lakhs - 12,500 Above 5-10 lakhs-20% of 5 lakhs-1,00,000 30% on remaining 10,23,119.20= 3,06,935.76 Total Tax Liability = 4,19,435.76 | Upto 2.5 Lakhs - NIL Tax Deduction -3,50,000 Total Tax Deduction (2,50,000+3,50,000 =6,00,000) Taxable Income (20,23,119.12-6,00,000 =14,23,119.20) 5% of 2,50,000 =12,500 20% of 5,00,000 =1,00,000 30% on remaining 6,73,119.20=2,01,935.76 Total Tax Liability = 3,14,435.76 Tax Savings (4,19,435.76-3,14,435.76 = 1,05,000 | Upto 2.5 Lakhs - NIL Tax Deduction -3,50,000 Total Tax Deduction (2,50,000+3,50,000 =6,00,000) Taxable Income (20,23,119.12-6,00,000 =14,23,119.20) 5% of 2,50,000 =12,500 20% of 5,00,000 =1,00,000 30% on remaining 6,73,119.20=2,01,935.76 Total Tax Liability = 3,14,435.76 Tax Savings (4,19,435.76-3,14,435.76 = 1,05,000 |
| 12 | 22,25,431.03 | 16,25,431.03 | 16,34,176.03 | Upto 2.5 Lakhs - NIL Above 2.5-5 Lakhs - 5% of 2.5 Lakhs - 12,500 Above 5-10 lakhs-20% of 5 lakhs-1,00,000 30% on remaining 12,25,431.03= 3,67,629.31 Total Tax Liability = 4,80,129.31 | Upto 2.5 Lakhs - NIL Tax Deduction -3,50,000 Total Tax Deduction (2,50,000+3,50,000 =6,00,000) Taxable Income (22,25,431.03-6,00,000 =16,25,431.03) 5% of 2,50,000 =12,500 20% of 5,00,000 =1,00,000 30% on remaining 8,75,431.03=2,62,629.30 Total Tax Liability = 3,75,129.30 Tax Savings (4,80,129.31-3,75,129.30 = 1,05,000 | Upto 2.5 Lakhs - NIL Tax Deduction -3,50,000 Total Tax Deduction (2,50,000+3,41,255 =5,91,255) Taxable Income (22,25,431.03-5,91,255 =16,34,176.03) 5% of 2,50,000 =12,500 20% of 5,00,000 =1,00,000 30% on remaining 8,84,176.03=2,65,252.81 Total Tax Liability = 3,77,752.81 Tax Savings (4,80,129.31-3,77,752.81 = 1,02,376.50 |
| 13 | 24,47,974.13 | 18,48,311.13 | 18,73,144.13 | Upto 2.5 Lakhs - NIL Above 2.5-5 Lakhs - 5% of 2.5 Lakhs - 12,500 Above 5-10 lakhs-20% of 5 lakhs-1,00,000 30% on remaining 14,47,974.13= 4,34,392.24 Total Tax Liability = 5,46,892.24 | Upto 2.5 Lakhs - NIL Tax Deduction -3,49,663 Total Tax Deduction (2,50,000+3,49,663 =5,99,663) Taxable Income (24,47,974.13-5,99,663 =18,48,311.13) 5% of 2,50,000 =12,500 20% of 5,00,000 =1,00,000 30% on remaining 10,98,311.13=3,29,493.34 Total Tax Liability = 4,41,993.34 Tax Savings (5,46,892.24-4,41,993.34 = 1,04,899 | Upto 2.5 Lakhs - NIL Tax Deduction -3,24,830 Total Tax Deduction (2,50,000+3,24,830 =5,74,830) Taxable Income (24,47,974.13-5,74,830 =18,73,144.13) 5% of 2,50,000 =12,500 20% of 5,00,000 =1,00,000 30% on remaining 11,23,144.13=3,36,943.24 Total Tax Liability = 4,49,443.24 Tax Savings (5,46,892.24-4,49,443.24 = 97,449 |
| 14 | 26,92,771.54 | 21,12,786.54 | 21,35,690.54 | Upto 2.5 Lakhs - NIL Above 2.5-5 Lakhs - 5% of 2.5 Lakhs - 12,500 Above 5-10 lakhs-20% of 5 lakhs-1,00,000 30% on remaining 16,92,771.54= 5,07,831.46 Total Tax Liability = 6,20,331.46 | Upto 2.5 Lakhs - NIL Tax Deduction -3,29,985 Total Tax Deduction (2,50,000+3,29,985 =5,79,985) Taxable Income (26,92,771.54-5,79,985 =21,12,786.54) 5% of 2,50,000 =12,500 20% of 5,00,000 =1,00,000 30% on remaining 13,62,786.54=4,08,835.96 Total Tax Liability = 5,21,335.96 Tax Savings (6,20,331.46-5,21,335.96 = 98,995.50 | Upto 2.5 Lakhs - NIL Tax Deduction -3,07,081 Total Tax Deduction (2,50,000+3,07,081 =5,57,81) Taxable Income (26,92,771.54-5,57,81 =21,35,690.54) 5% of 2,50,000 =12,500 20% of 5,00,000 =1,00,000 30% on remaining 13,85,690.54=4,15,707.16 Total Tax Liability = 5,28,207.16 Tax Savings (6,20,331.46-5,28,207.16 = 92,124.30 |
| 15 | 29,62,048.69 | 23,53,501.69 | 24,24,147.69 | Upto 2.5 Lakhs - NIL Above 2.5-5 Lakhs - 5% of 2.5 Lakhs - 12,500 Above 5-10 lakhs-20% of 5 lakhs-1,00,000 30% on remaining 19,62,048.69= 5,88,614.61 Total Tax Liability = 7,01,114.61 | Upto 2.5 Lakhs - NIL Tax Deduction -3,58,547 Total Tax Deduction (2,50,000+3,58,547 =6,08,547) Taxable Income (29,62,048.69-6,08,547 =23,53,501.69) 5% of 2,50,000 =12,500 20% of 5,00,000 =1,00,000 30% on remaining 16,03,501.69=4,81,050.51 Total Tax Liability = 5,93,550.51 Tax Savings (7,01,114.61-5,93,550.51 = 1,07,564.13 | Upto 2.5 Lakhs - NIL Tax Deduction -2,87,901 Total Tax Deduction (2,50,000+2,87,901 =5,37,901) Taxable Income (29,62,048.69-5,37,901 =24,24,147.69) 5% of 2,50,000 =12,500 20% of 5,00,000 =1,00,000 30% on remaining 16,74,147.69=5,02,244.31 Total Tax Liability = 6,14,744.31 Tax Savings (7,01,114.61-6,14,744.31 = 86,370.30 |
| 16 | 32,58,253.56 | 27,23,063.56 | 27,41,078.56 | Upto 2.5 Lakhs - NIL Above 2.5-5 Lakhs - 5% of 2.5 Lakhs - 12,500 Above 5-10 lakhs-20% of 5 lakhs-1,00,000 30% on remaining 22,58,253.56= 6,77,476.07 Total Tax Liability = 7,89,976.07 | Upto 2.5 Lakhs - NIL Tax Deduction -2,85,190 Total Tax Deduction (2,50,000+2,85,190 =5,35,190) Taxable Income (32,58,253.56-5,35,190 =27,23,063.56) 5% of 2,50,000 =12,500 20% of 5,00,000 =1,00,000 30% on remaining 19,73,063.56=5,91,919.07 Total Tax Liability = 7,04,419.07 Tax Savings (7,89,976.07-7,04,419.07 = 85,557 | Upto 2.5 Lakhs - NIL Tax Deduction -2,67,175 Total Tax Deduction (2,50,000+2,67,175 =5,17,175) Taxable Income (32,58,253.56-5,17,175 =27,41,078.56) 5% of 2,50,000 =12,500 20% of 5,00,000 =1,00,000 30% on remaining 19,91,078.56=5,97,323.57 Total Tax Liability = 7,09,823.57 Tax Savings (7,89,976.07-7,09,823.57 = 80,152.50 |
| 17 | 35,84,078.92 | 30,74,335.9 | 30,89,301.92 | Upto 2.5 Lakhs - NIL Above 2.5-5 Lakhs - 5% of 2.5 Lakhs - 12,500 Above 5-10 lakhs-20% of 5 lakhs-1,00,000 30% on remaining 25,84,078.92= 7,75,223.68 Total Tax Liability = 8,87,723.68 | Upto 2.5 Lakhs - NIL Tax Deduction -2,59,743 Total Tax Deduction (2,50,000+2,59,743 =5,09,743) Taxable Income (35,84,078.92-5,09,743 =30,74,335.92) 5% of 2,50,000 =12,500 20% of 5,00,000 =1,00,000 30% on remaining 23,24,335.92=6,97,300.78 Total Tax Liability = 8,09,800.78 Tax Savings (8,87,723.68-8,09,800.78 = 77,922.90 | Upto 2.5 Lakhs - NIL Tax Deduction -2,44,777 Total Tax Deduction (2,50,000+2,44,777 =4,94,777) Taxable Income (35,84,078.92-4,94,777 =30,89,301.92) 5% of 2,50,000 =12,500 20% of 5,00,000 =1,00,000 30% on remaining 23,39,301.92=7,01,790.58 Total Tax Liability = 8,14,290.58 Tax Savings (8,87,723.68-8,14,290.58 = 73,433.10 |
| 18 | 39,42,486.81 | 34,60,466.81 | 34,71,913.81 | Upto 2.5 Lakhs - NIL Above 2.5-5 Lakhs - 5% of 2.5 Lakhs - 12,500 Above 5-10 lakhs-20% of 5 lakhs-1,00,000 30% on remaining 29,42,486.81= 8,82,746.03 Total Tax Liability = 9,95,246.03 | Upto 2.5 Lakhs - NIL Tax Deduction -2,32,020 Total Tax Deduction (2,50,000+2,32,020 =4,82,020) Taxable Income (39,42,486.81-4,82,020 =34,60,466.81) 5% of 2,50,000 =12,500 20% of 5,00,000 =1,00,000 30% on remaining 27,10,466.81=8,13,140.04 Total Tax Liability = 9,25,640.04 Tax Savings (9,95,246.03-9,25,640.04 = 69,605.99 | Upto 2.5 Lakhs - NIL Tax Deduction -2,20,573 Total Tax Deduction (2,50,000+2,20,573 =4,70,573) Taxable Income (39,42,486.81-4,70,573 =34,71,913.81) 5% of 2,50,000 =12,500 20% of 5,00,000 =1,00,000 30% on remaining 27,21,913.81=8,16,574.14 Total Tax Liability = 9,29,074.14 Tax Savings (9,95,246.03-9,29,074.14 = 66,171.89 |
| 19 | 43,36,735.49 | 38,84,919.49 | 38,92,318.49 | Upto 2.5 Lakhs - NIL Above 2.5-5 Lakhs - 5% of 2.5 Lakhs - 12,500 Above 5-10 lakhs-20% of 5 lakhs-1,00,000 30% on remaining 33,36,735.49= 10,01,020.65 Total Tax Liability = 11,13,520.65 | Upto 2.5 Lakhs - NIL Tax Deduction -2,01,816 Total Tax Deduction (2,50,000+2,01,8160 =4,51,816) Taxable Income (43,36,735.49-4,51,816 =38,84,919.49) 5% of 2,50,000 =12,500 20% of 5,00,000 =1,00,000 30% on remaining 31,34,919.49=9,40,475.85 Total Tax Liability = 10,52,975.85 Tax Savings (11,13,520.65-10,52,975.85 = 60,544.80) | Upto 2.5 Lakhs - NIL Tax Deduction -1,94,417 Total Tax Deduction (2,50,000+1,94,417 =4,44,417) Taxable Income (43,36,735.49-4,44,417 =38,92,318.49) 5% of 2,50,000 =12,500 20% of 5,00,000 =1,00,000 30% on remaining 31,42,318.49=9,42,695.55 Total Tax Liability = 10,55,195.55 Tax Savings (11,13,520.65-10,55,195.55 = 58,325.10) |
| 20 | 47,70,409.03 | 43,51,499.03 | 43,54,257.03 | Upto 2.5 Lakhs - NIL Above 2.5-5 Lakhs - 5% of 2.5 Lakhs - 12,500 Above 5-10 lakhs-20% of 5 lakhs-1,00,000 30% on remaining 37,70,409.03= 11,31,122.71 Total Tax Liability = 12,43,622.71 | Upto 2.5 Lakhs - NIL Tax Deduction -1,68,910 Total Tax Deduction (2,50,000+1,68,910 =4,18,910) Taxable Income (47,70,409.03-4,18,910 =43,51,499.03) 5% of 2,50,000 =12,500 20% of 5,00,000 =1,00,000 30% on remaining 36,01,499.03=10,80,449.71 Total Tax Liability = 11,92,949.71 Tax Savings (12,43,622.71-11,92,949.71 = 50,673) | Upto 2.5 Lakhs - NIL Tax Deduction -1,66,152 Total Tax Deduction (2,50,000+1,66,152 =4,16,152) Taxable Income (47,70,409.03-4,16,152 =43,54,257.03) 5% of 2,50,000 =12,500 20% of 5,00,000 =1,00,000 30% on remaining 36,04,257.30=10,81,277.19 Total Tax Liability = 11,93,777.19 Tax Savings (12,43,622.71-11,93,777.19 = 49,845.52) |
An Overview of Rental Costs Ahead
The rental costs for 20 years can be calculated taking into account an assumed appreciation rate of 10% each year. So, if you are staying in a 2-BHK flat across major cities, the monthly rent can be around ₹20,000. Let’s start with rent value of today and see what it would turn out in the next 20 years.
| Year | Initial Rent Value (In ₹) | Appreciation Rate | Rent to be Paid at the End of Each Year (In ₹) |
|---|---|---|---|
| 1 | 20000 | 10% | 2,40,000 (20,000 x 12) |
| 2 | 22000 | 10% | 2,64,000 (22,000 x 12) |
| 3 | 24200 | 10% | 2,90,400 (24,200 x 12) |
| 4 | 26620 | 10% | 3,19,440 (26,620 x 12) |
| 5 | 29282 | 10% | 3,51,384 (29,282 x 12) |
| 6 | 32210.2 | 10% | 3,86,522.40 (32,210.20 x 12) |
| 7 | 35431.22 | 10% | 4,25,174.64 (35,431.22 x 12) |
| 8 | 38974.34 | 10% | 4,67,692.10 (38,974.34 x 12) |
| 9 | 42871.77 | 10% | 5,14,461.29 (42,871.77 x 12) |
| 10 | 47158.95 | 10% | 5,65,907.36 (47,158.95 x 12) |
| 11 | 57062.34 | 10% | 6,84,748.08 (57,062.34 x 12) |
| 12 | 62768.57 | 10% | 7,53,222.84 (62,768.57 x 12) |
| 13 | 69045.43 | 10% | 8,28,545.16 (69,045.43 x 12) |
| 14 | 75949.97 | 10% | 9,11,399.64 (75,949.97 x 12) |
| 15 | 83544.97 | 10% | 10,02,539.64 (83,544.97 x 12) |
| 16 | 91899.47 | 10% | 11,02,793.64 (91,899.47 x 12) |
| 17 | 1,01,089.42 | 10% | 12,13,073.04 (1,01,089.42 x 12) |
| 18 | 1,11,198.362 | 10% | 13,34,380.34 (1,11,198.362 x 12) |
| 19 | 1,22,318.20 | 10% | 14,67,818.40 (1,22,318.20 x 12) |
| 20 | 1,34,550.02 | 10% | 16,14,600.24 (1,34,550.02 x 12) |
| Total Rental Cost =1,47,38,102.81 | |||
Let’s assume you shift in every 4 years. In that case, you would make a total shift of 4 in 20 years time. The estimated shifting cost can be around ₹2,500 today. So, what will be the total cost of shifting if the rate appreciates by 5% in every 4 years? Wanna know? Take a look at the table below.
| Shifting Year | Appreciation Rate | Cost (In ₹) |
|---|---|---|
| 5th | 5% | 2625 |
| 9th | 5% | 2756.25 |
| 13th | 5% | 2894.06 |
| 17th | 5% | 3038.76 |
| Total Shifting Cost=11,314.07 | ||
If we add shifting and rental cost, the total outgo on a rental accommodation would be around ₹1,47,49,416.88 over 20 years.
After all the analysis, we have come to decide the winner of ‘Home Loan v/s Rent’. We can now proudly say a ‘Home Loan’ wins the battle fair and square over the rental accommodation. Where rental costs including shifting could touch well past a crore, the loan cost of ₹78,98,935 (With CLSS) /₹84,03,762 (Without CLSS) would reduce further with the tall tax deduction, which was illustrated in the tables above.
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