{"id":230238,"date":"2025-02-02T11:16:09","date_gmt":"2025-02-02T11:16:09","guid":{"rendered":"https:\/\/news.talkwithrattan.com\/index.php\/2025\/02\/02\/budget-2025-rent-a-home-or-buy-one-thats-a-yuge-dilemma-the-times-of-india\/"},"modified":"2025-02-02T11:16:10","modified_gmt":"2025-02-02T11:16:10","slug":"budget-2025-rent-a-home-or-buy-one-thats-a-yuge-dilemma-the-times-of-india","status":"publish","type":"post","link":"https:\/\/news.talkwithrattan.com\/index.php\/2025\/02\/02\/budget-2025-rent-a-home-or-buy-one-thats-a-yuge-dilemma-the-times-of-india\/","title":{"rendered":"Budget 2025: Rent a home or buy one? That\u2019s a yuge dilemma – The Times of India"},"content":{"rendered":"
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Is it better to stay on rent or get your own place? It\u2019s complicated, to borrow a phrase from romantic conundrums. So, should one spend a big sum on a house property \u2013 especially with the help of a home loan \u2013 given that prices are higher and the capital appreciation in many towns is not as significant as it once was? Isn\u2019t living on rent, perhaps closer to the office, easier? On the other hand, an investment in a house property is a secured and tangible investment.Plus, a house is not just four walls; there is a lot of emotion attached to it. Let\u2019s look at it from the tax perspective\u2026
Renting a house<\/span>
One of the biggest advantages of renting a house from a tax perspective is the exemption for house rent allowance (HRA), a tax-efficient salary component. If HRA is not a part of your salary package \u2014 for example if you are self-employed or a consultant\u2014 you can avail deduction of up to 5,000 a month from gross taxable
income, under the old tax regime. The HRA exemption is not available to taxpayers who opt for the new tax regime. The exemption is on the lowest of the following:
\u25cf Rent paid less 10% of salary (basic salary and dearness allowance)
\u25cf 50% of salary if the house is in Delhi, Mumbai, Kolkata or Chennai, or 40% of salary in other cities
\u25cf Actual HRA received
Other pros<\/span>
\u25cf Rent may be lower than a home loan EMI
\u25cf More choice of location and type
\u25cf Easy to relocate to another area of city
\u25cf Tax benefits are available (under old tax regime)
Cons<\/span>
\u25cf Rent, however high, does not go towards creating an asset
\u25cf Rents usually increase every year, leading to higher cash outflow
\u25cf No or limited scope of making structural changes
\u25cf One may have to vacate on short notice
Buying a property<\/span>
Tax benefits are only available under the old tax regime. If you take a home loan to buy a house property, the EMI is typically made up of two parts: one part goes towards the principal (the amount you took as loan) and the other towards the interest (the cost of servicing the loan).<\/p>\n

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On principal repayment: <\/span>Deduction is available under the overall 1.5 lakh limit under Section 80C under the old tax regime. Principal repayment, stamp duty, registration fee and other expenses related to transfer of the house property qualify for the deduction, under this limit.
On interest paid: <\/span>Three situations apply: the house is self-occupied, vacant or rented out. For a self-occupied house property, there is deduction available on the interest paid on home loan up to 2 lakh per annum under the old tax regime. This can be set off against any other income. The same rules apply even if the house is vacant. If you have rented out the house, you can claim deduction for not only the interest paid on the home loan, but also municipal taxes paid and a standard deduction of 30% of the rental income.
Set-off and carry forward of loss: <\/span>If your house is a self-occupied property bought using a home loan, it means you do not earn any rental income from it. Therefore, interest paid on the home loan will result in a loss. Total loss up to 2 lakh from house property (either self-occupied or letout) can be adjusted in a financial year against any other head of income (such as salary or income from other sources). Loss exceeding 2 lakh can be carried forward for eight subsequent assessment years but can be setoff only against \u2018Income from house property\u2019.
Notional rent: <\/span>The concept of notional rent applies when an individual owns three houses or more. In such cases, two house properties are considered self-occupied (without any conditions as per the 2025 Budget proposals) and the remaining are treated as \u2018deemed let-out\u2019, thus attracting notional rent. This is based on the expected market rent and becomes a taxable income.
Pros:<\/span>
\u25cf A house is an asset and EMIs go towards creating this asset
\u25cf Substantial tax benefits on home loans
Cons:<\/span>
\u25cf Heavy upfront costs such as down payment and registration, followed by property taxes and repairs
\u25cf House properties are illiquid as they cannot be sold quickly
\u25cf Property prices see fluctuations and may not fetch expected returns
\u25cf EMIs have to be paid regularly, mostly irrespective of situations like loss of income<\/div>\n