HRA vs Home Loan Calculator India โ Rent or Buy? 2026
Compare renting (HRA tax benefit) vs buying (Section 24b + 80C deductions). See Year 1 tax savings, total cost over 20 years, and whether renting + SIP investing beats property ownership. Based on FY 2025-26 Income Tax Act rules.
Try another scenario
How to Use This Calculator
Tax Comparison tab
Enter your gross income, basic salary, HRA received, and monthly rent. Add the property price and home loan rate for the buying scenario. Choose Old or New tax regime. The calculator compares your annual tax saving from HRA exemption (renting) vs Section 24(b) + 80C deductions (buying). Under the New Regime, neither benefit is available.
Total Cost tab
See the full financial picture over 20 years: total rent paid (with annual escalation) vs total EMI + maintenance − property equity. Includes price-to-rent ratio assessment and opportunity cost of your down payment. Indian metros typically have price-to-rent ratios of 25–35×, which often favors renting from a pure cost perspective.
Rent + Invest tab
If renting is cheaper than buying, the surplus (EMI + maintenance − rent) is invested in a SIP at 12% CAGR (Nifty 50 historical 20-year return). The down payment is also invested as a lump sum. See whether SIP corpus beats property value after 20 years — with year-by-year milestones.
Share your result
Every input is encoded in the URL. Click Share to send your exact scenario to a spouse, financial advisor, or bookmark it for later.
The Formulas
Exemption = MINIMUM of:
(1) Actual HRA received from employer
(2) Rent paid − 10% of basic salary
(3) 50% of basic salary (metro) or 40% of basic salary (non-metro)
Metro cities: Delhi, Mumbai, Chennai, Kolkata ONLY.
Bangalore, Hyderabad, Pune are non-metro for HRA purposes.
Home Loan Tax Benefits (Old Regime only):
Section 24(b): Interest deduction up to ₹2,00,000/year (self-occupied)
Section 80C: Principal deduction up to ₹1,50,000/year (shared with PPF, ELSS, LIC)
Section 80EEA: EXPIRED after FY 2022-23 — NOT available
New Regime (Section 115BAC):
NO HRA exemption. NO Section 24(b). NO Section 80C.
Both renting and buying have zero tax benefits under new regime.
EMI Formula (reducing balance):
EMI = P × r × (1+r)n / ((1+r)n − 1)
Where P = principal, r = monthly rate (annual/12/100), n = months
Price-to-Rent Ratio:
Ratio = Property Price / Annual Rent
Below 20× = buying favorable | 20–25× = borderline | Above 25× = renting favorable
Example
Ankit — Bengaluru IT professional, ₹15L CTC, choosing between renting at ₹25K/month vs buying an ₹80L flat
Ankit earns ₹15,00,000 gross. Basic salary ₹6,00,000/year, HRA ₹3,00,000/year. He pays ₹25,000 rent in Bengaluru (non-metro for HRA). He is considering buying an ₹80,00,000 flat with 20% down payment. He is on the old tax regime and has ₹50,000 of 80C already used via ELSS.
Step 1: HRA tax saving (renting)
Step 2: Home loan tax saving (buying)
Step 3: Comparison
Renting is significantly cheaper in Year 1 for Ankit. But he should also consider the Rent + Invest tab to see whether investing the ₹16L down payment + monthly surplus creates more wealth than owning the flat over 20 years.
Price-to-Rent Ratio in Indian Metros (2025-26 data)
The price-to-rent ratio tells you how many years of rent equals the property price. The higher the ratio, the more renting makes financial sense.
Below 20×: buying is usually better. 20–25×: borderline, depends on appreciation. Above 25×: renting + investing the difference often beats buying purely on a financial basis.
Important: This ratio does not capture emotional benefits of ownership (stability, customization, pride), which matter to many buyers.
Why the New Tax Regime changes the rent vs buy math
Under the Old Regime, salaried employees get two powerful tax benefits: HRA exemption (renting) and Sec 24(b) + 80C (buying). This narrows the gap between renting and buying costs.
Under the New Regime (default from FY 2023-24), neither benefit is available. This means:
- Rent has no tax benefit — full outflow
- EMI has no tax benefit — full outflow
- The comparison becomes purely about cash flow and wealth building
- Since EMI is typically 2–3× of rent in Indian metros, renting becomes even more advantageous under new regime
This is why many financial advisors recommend sticking with the Old Regime if you have a home loan or pay significant rent — use our Income Tax Calculator to compare regimes.
Assumptions and limitations of the Rent + Invest strategy
The "rent and invest the difference" strategy assumes:
- Discipline: You actually invest the surplus every month via SIP. Many people spend it instead.
- 12% SIP return: Based on Nifty 50 20-year rolling CAGR. Actual returns vary. Worst 20-year period returned ~8%.
- No LTCG tax: Equity gains above ₹1.25L/year attract 10% LTCG. Not included for simplicity.
- Rent stability: Landlord may ask you to vacate. Ownership provides tenure security.
- Leverage advantage: Buying uses bank's money (loan) which amplifies returns on your equity (down payment). This is not captured in a simple SIP comparison.
- Forced savings: EMI is a forced savings mechanism. SIP requires voluntary commitment.
Bottom line: Mathematically, rent + invest often wins in high price-to-rent markets (Mumbai, Delhi). But buying wins on behavioral economics (forced savings, leverage, emotional security).