Calculators Personal Finance
Rent vs Buy Calculator
Most rent-vs-buy tools either ignore the Indian tax system or get it wrong. This one doesn't. It models Section 24(b) home loan interest deduction, 80C principal repayment, HRA exemption under the Income Tax Act 2025 (all 8 metro cities), LTCG at 12.5%, and the compounding power of the down payment invested instead — and shows you the year-by-year verdict.
Additional parameters
Auto-suggested at 2.75% gross rental yield
Rent schedule · 11-month cycles
| Period | Monthly rent | Cycle total |
|---|---|---|
| Mth 1–11 | ₹2.04 L | |
| Mth 13–23 | ₹2.20 L | |
| Mth 25–35 | ₹2.38 L | |
| Mth 37–47 | ₹2.56 L | |
| Mth 49–59 | ₹2.77 L | |
| Mth 61–71 | ₹2.99 L | |
| Mth 73–83 | ₹3.23 L | |
| Mth 85–95 | ₹3.49 L | |
| Mth 97–107 | ₹3.76 L | |
| Mth 109–119 | ₹4.07 L | |
| Mth 121–131 | ₹4.39 L | |
| Mth 133–143 | ₹4.74 L | |
| Mth 145–155 | ₹5.13 L | |
| Mth 157–167 | ₹5.53 L | |
| Mth 169–179 | ₹5.97 L | |
| Mth 181–191 | ₹6.46 L | |
| Mth 193–203 | ₹6.97 L |
Default: 3 months rent · ₹55,500
Each co-borrower claims Section 24(b) on their share of interest (up to ₹2L each, old regime only). Switch to Joint to enter spouse income below.
New regime: no HRA exemption, no 24(b), no 80C — but lower slab rates. "Compare" shows both verdicts side by side.
Metro (50% HRA): Delhi, Mumbai, Chennai, Kolkata, Bengaluru, Pune, Hyderabad, Ahmedabad. All other cities: 40%.
Return on the down payment + stamp duty + renovation if invested instead of used for purchase. Conservative: 7–8% (debt-heavy). Balanced: 10–11%.
Sensitivity Analysis
Vary one input, hold all others fixed. Each bar shows which side wins across the tested range; | marks the flip point and ● is your current value.
What's modelled
- EMI: standard reducing-balance; full month-by-month amortisation aggregated to years
- Section 24(b): ₹2L/year cap (self-occupied) — old regime only
- Section 80C: principal within remaining headroom (₹1.5L − other 80C) — old regime only
- Section 80EEA (₹1.5L additional for affordable housing, stamp duty ≤ ₹45L): expired March 2022 — not applicable for new loans in FY 2026-27
- HRA exemption: least of actual HRA, 50% of Basic+DA, rent − 10% of Basic+DA (Section 14(10), IT Act 2025) — old regime only
- New regime: no HRA, no 24(b), no 80C; slab rates per IT Act 2025 (₹75K std ded. for salaried)
- Property LTCG at 12.5% (Finance Act 2024; ≥2 years holding); STCG at slab rate
- Tax savings counted as cash in hand (conservative — not reinvested)
- Renter invests: down payment + stamp duty + renovation as lump sum at t=0; annual outflow delta as implicit SIP
Why most Rent vs Buy calculators give you the wrong answer
The typical tool asks: "What's your EMI vs rent?" and then compares the two monthly payments. This misses almost everything that matters:
- Tax regime difference: Under the old regime, a ₹80L home loan at 8.75% saves you roughly ₹62,400/year in Section 24(b) tax in year 1 (at the 30% slab). Renters on the old regime save ₹90,000+ in HRA exemption. Neither benefit exists under the new regime. The two scenarios are not comparable without knowing your regime.
- Opportunity cost of the down payment: A 20% down payment on a ₹80L property is ₹16L — plus ₹4.8L stamp duty + ₹2L renovation = ₹22.8L deployed at t=0. At 10% annual return, this grows to ₹95L over 15 years. If property appreciates at only 6%, the corpus from investing often wins.
- HRA metro city error: Most calculators apply the 40% rate to Bengaluru and Hyderabad. Under Section 14(10) of the Income Tax Act 2025 (effective April 2026), both cities are metro — the 50% rate applies. This changes the HRA saving by up to ₹15,000/year for high earners.
- Rent escalation model: Indian leases are 11 months, not 12. Renegotiation happens at each renewal. A smooth 8%/year assumption understates the true escalation rate by nearly 1 percentage point per year when compounded over 15 years.
How the model works
Every year, the calculator computes two things for each path:
Buy path net wealth = Property value − Outstanding loan − Capital gains tax (LTCG at 12.5%) − Sunk transaction costs (stamp duty + renovation) + Accumulated tax savings from Section 24(b) and 80C.
Rent path net wealth = Investment corpus. The corpus starts with the full capital that would have been deployed at purchase (down payment + stamp duty + renovation), grows at your assumed investment return, and is adjusted each year by the difference in cash outflows between the two paths. If renting costs less this year, the difference is added to the corpus. If buying costs less, the difference is subtracted.
The verdict at any year is simply: which corpus is larger?
The 8 metro cities under the Income Tax Act 2025
The Income Tax Act 2025 (which replaces the IT Act 1961 from FY 2026-27) expanded the list of cities qualifying for the 50% HRA rate under Section 14(10). The four cities from the old Act — Delhi, Mumbai, Chennai, Kolkata — remain. Four new cities join from April 2026: Bengaluru, Pune, Hyderabad, and Ahmedabad. Every other city in India uses the 40% rate.
Toggle "Metro" in the calculator if you live in any of these eight cities. If you are filing your FY 2025-26 ITR (the current year), use "Non-metro" for Bengaluru, Pune, Hyderabad, and Ahmedabad — the old four-city rule still applies for last year's income.
Frequently asked questions
Is it better to rent or buy a house in India in 2026?
There is no universal answer — it depends on the property's price-to-rent ratio, your tax regime, income, investment alternatives, and how long you intend to stay. As a rule of thumb: if the price-to-rent ratio (property value ÷ annual rent) is below 15, buying often makes financial sense. Above 20, renting and investing the down payment frequently wins over a 10–15 year horizon. In high-cost cities like Mumbai and Bengaluru where P/R ratios exceed 25–30, the opportunity cost of the down payment is enormous. Use this calculator with your specific numbers.
What is Section 24(b) and how does it affect rent vs buy?
Section 24(b) of the Income Tax Act allows homeowners on the old tax regime to deduct up to ₹2,00,000 per year of home loan interest from their taxable income (for self-occupied property). On a ₹80L loan at 8.75%, the first year's interest is around ₹6.5L — but only ₹2L is deductible. At a 30% slab, this saves ₹62,400 in tax in year 1. This deduction declines each year as more of the EMI becomes principal. The Section 24(b) benefit is not available under the new tax regime.
How does HRA exemption work when comparing renting vs buying?
HRA exemption under Section 14(10) of the Income Tax Act 2025 is available only in the old regime. The exempt amount is the least of: (1) actual HRA received from employer, (2) 50% of Basic+DA if you live in a metro or 40% otherwise, and (3) rent paid minus 10% of Basic+DA. For a person in Bengaluru earning ₹15L with ₹3L HRA, paying ₹25,000/month rent, the exempt amount is typically close to the full ₹3L HRA — saving around ₹93,600/year in tax at the 30% slab. This is the biggest tax advantage of renting that most calculators miss entirely.
Which cities count as metro for HRA in FY 2026-27?
Under Section 14(10) of the Income Tax Act 2025, effective from FY 2026-27 (April 1, 2026), eight cities qualify as metro for the 50% HRA rate: Delhi, Mumbai, Chennai, Kolkata (original four) plus Bengaluru, Pune, Hyderabad, and Ahmedabad (newly added). All other cities use the 40% rate. For FY 2025-26 ITR filing (current year), only the original four cities apply under the old Section 10(13A).
What is the price-to-rent ratio and how do I interpret it?
Price-to-Rent ratio = property value ÷ annual rent for an equivalent property. Below 15: buying is likely better. 15–20: gray zone where job stability and personal factors dominate. Above 20: renting and investing the down payment is usually the stronger financial choice. Above 25: strong renting signal. Typical city ranges in India: Mumbai 30–40, Bengaluru 22–30, Delhi 20–28, Tier-2 cities 12–18.
How is LTCG on property calculated in 2026?
Long-term capital gains on property sold after 24 months are taxed at 12.5% without indexation for properties purchased after July 23, 2024 (Finance Act 2024). For older properties, you can choose between 20% with indexation or 12.5% without. Short-term gains (sale within 24 months) are taxed at your income slab rate. This calculator uses 12.5% to model the cost of selling at the end of your analysis horizon.
Should I compare old regime or new regime for rent vs buy?
The old regime is where the tax complexity lives: Section 24(b), 80C, and HRA exemption all require it. Under the new regime, none of these apply and the decision becomes simpler: property appreciation vs investment returns. For most people in the 30% slab who have significant home loan interest and HRA, the old regime still provides substantial net benefit on the deduction side. Use the Compare mode in Your Tax Profile to see both verdicts side by side with your numbers.
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