Home Loan vs Rent – Now With PMAY & Tax Benefits, It’s a No-brainer!

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 your pocket 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 GrabbersHome LoanRent
Tax BenefitsYes, Under Section 24 and 80C of the Income Tax Act -
Interest SubsidyAvailable Under PMAY Scheme-
CostsDown with Falling Rates, Interest Subsidy and Other DevelopmentsMay Double That of Home Loan Over 20 Years
ConvenienceAssured of Permanent Stay, Convenience and Other PrivilegesHassles of Shifting All the Time
Other BenefitsEMI 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.

CostsAmount (In ₹)
EMI34967
Interest Outgo43,91,962
Total Outgo 83,91,962
One-time Processing Fee Including GST11,800 (Approx.)
Overall Loan Cost84,03,762

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.

ParticularsAmount (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 Subsidy78,98,935

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.

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.

YearActual Principal Repayment Without CLSSActual Interest Repayment Without CLSSActual Principal Repayment with CLSSActual Interest Repayment with CLSSTax Deduction on Principal Without CLSSTax Deduction on Interest Without CLSSTax Deduction on Principal with CLSSTax Deduction on Interest with CLSS
178,6503,40,94886,7953,08,14878,6502,00,00086,7952,00,000
285,6873,33,91193,7943,01,15085,6872,00,00093,7942,00,000
393,3533,26,2441,01,3572,93,586933532,00,0001,01,3572,00,000
41,01,7063,17,8921,09,5302,85,4131,01,7062,00,0001,09,5302,00,000
51,10,8063,08,7921,18,3622,76,5811,10,8062,00,0001,18,3622,00,000
61,20,7202,98,8781,27,9062,67,0371,20,7202,00,0001,27,9062,00,000
71,31,5212,88,0771,38,2202,56,7231,31,5212,00,0001,38,2202,00,000
81,43,2892,76,3091,49,3662,45,5781,43,2892,00,0001,49,3662,00,000
91,56,1092,63,4891,61,4102,33,5341,50,0002,00,0001,50,0002,00,000
101,70,0762,49,5211,74,4252,20,5191,50,0002,00,0001,50,0002,00,000
111,85,2942,34,3041,88,4902,06,4541,50,0002,00,0001,50,0002,00,000
122,01,8722,17,7252,03,6891,91,2551,50,0002,00,0001,50,0001,91,255
132,19,9341,99,6632,20,1131,74,8301,50,0001,99,6631,50,0001,74,830
142,39,6121,79,9852,37,8621,57,0811,50,0001,79,9851,50,0001,57,081
152,61,0511,58,5472,57,0421,37,9011,50,0001,58,5471,50,0001,37,901
162,84,4081,35,1902,77,7691,17,1751,50,0001,35,1901,50,0001,17,175
173,09,8541,09,7433,00,16794,7771,50,0001,09,7431,50,00094,777
183,37,57882,0203,24,37170,5731,50,00082,0201,50,00070,573
193,67,78251,8163,50,52744,4171,50,00051,8161,50,00044,417
204,00,93718,9103,79,00416,1521,50,00018,9101,50,00016,152
Total40,00,23943,9196240,00,23941,33,93526,65,73233,35,87427,25,33032,04,161
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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.

YearAnnual 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 CLSSTax Savings on Home Loan With CLSS
17,80,0002,51,350NILUpto 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
28,58,0003,22,3133,14,206Upto 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)
39,43,8004,00,4473,92,443Upto 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)
410,38,1804,86,4744,78,650Upto 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)
511,41,9985,81,1925,73,636Upto 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)
612,56,197.806,85,477.806,78,291.80Upto 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)
713,81,817.588,00,296.587,93,597.58Upto 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)
815,19,999.349,26,710.349,20,633.34Upto 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)
916,71,999.276,00,0006,00,000Upto 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
1018,39,199.2012,39,199.2012,39,199.20Upto 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
1120,23,119.1214,23,119.2014,23,119.20Upto 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
1222,25,431.0316,25,431.0316,34,176.03Upto 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
1324,47,974.1318,48,311.1318,73,144.13Upto 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
1426,92,771.5421,12,786.5421,35,690.54Upto 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
1529,62,048.6923,53,501.6924,24,147.69Upto 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
1632,58,253.5627,23,063.5627,41,078.56Upto 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
1735,84,078.9230,74,335.930,89,301.92Upto 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
1839,42,486.8134,60,466.8134,71,913.81Upto 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
1943,36,735.4938,84,919.4938,92,318.49Upto 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)
2047,70,409.0343,51,499.0343,54,257.03Upto 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)
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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.

YearInitial Rent Value  (In ₹)Appreciation Rate Rent to be Paid at the End of Each Year  (In ₹)
12000010%2,40,000 (20,000 x 12)
22200010%2,64,000 (22,000 x 12)
32420010%2,90,400 (24,200 x 12)
42662010%3,19,440 (26,620 x 12)
52928210%3,51,384 (29,282 x 12)
632210.210%3,86,522.40 (32,210.20 x 12)
735431.2210%4,25,174.64 (35,431.22 x 12)
838974.3410%4,67,692.10 (38,974.34 x 12)
942871.7710%5,14,461.29 (42,871.77 x 12)
1047158.9510%5,65,907.36 (47,158.95 x 12)
1157062.3410%6,84,748.08 (57,062.34 x 12)
1262768.5710%7,53,222.84 (62,768.57 x 12)
1369045.4310%8,28,545.16 (69,045.43 x 12)
1475949.9710%9,11,399.64 (75,949.97 x 12)
1583544.9710%10,02,539.64
(83,544.97 x 12)
1691899.4710%11,02,793.64
(91,899.47 x 12)
171,01,089.4210%12,13,073.04
(1,01,089.42 x 12)
181,11,198.36210%13,34,380.34
(1,11,198.362 x 12)
191,22,318.2010%14,67,818.40 (1,22,318.20 x 12)
201,34,550.0210%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.

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Shifting YearAppreciation RateCost  (In ₹)
5th5%2625
9th5%2756.25
13th5%2894.06
17th5%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.

Personal Loan Interest Rates December 2017
Bajaj Finserv 10.99% - 16.00%
Fullerton India 14.00% - 33.00%
HDFC Bank 10.99% - 20.70%
ICICI Bank 10.99% - 18.40%
IndusInd Bank 12.99% - 20.00%
Kotak Bank 10.99% - 17.99%
RBL 14.00% - 18.00%
Standard Chartered Bank 10.99% - 14.49%
Tata Capital 11.49% - 18.00%
Home Loan Interest Rates December 2017
State Bank of India/SBI 8.30% - 8.60%
HDFC 8.35% - 8.95%
Bank of Baroda 8.30% - 9.30%
LIC Housing 8.35% - 8.70%
PNB Housing Finance 8.35% - 8.70%
ICICI Bank 8.35% - 8.85%
Axis Bank 8.35% - 8.75%
Citibank 8.60% - 9.35%
Indiabulls Housing Finance Limited 8.35% - 8.55%
Kotak Bank 8.35%
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