Union Budget 2026: To rent or to buy... what's the best move?

Rent or own? Reap the benefits of appreciation, even if mellowed, or take up a place of one’s liking, preferably close to office and cut down the commute? There are advocates of both, pushing for a secured and tangible investment or go aggro on investment instead of getting tied down by brick and mortar, as the case may be. Setting aside the emotional and practical argument of settling down in one’s own home and doing it early, let’s look at the what the tax landscape looks like in either case.Renting a houseOne 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. The HRA exemption is not available to taxpayers who opt for the new tax regime. If HRA is not a part of your salary package — for example if you are selfemployed or a consultant — you can avail deduction of up to 5,000 a month from gross taxable income, under the old tax regime.● The HRA exemption is on the lowest of these three: Rent paid minus 10% of salary (basic salary plus dearness allowance)● 50% of salary if the house is in Delhi, Mumbai, Kolkata or Chennai, or 40% of salary in other cities● Actual HRA receivedOther pros● Rent may be lower than a home loan EMI● More choice of location and type● Easy to relocate to another area of city● Tax benefits are available (under old tax regime)Cons● Rent, however high, does not go towards creating an asset● Rents usually increase every year, leading to higher cash outflow● No or limited scope of making structural changes● One may have to vacate on short notice on a transfer or job change Buying a propertyTax benefits on self-occupied/vacant property 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).On Principal Repayment: Deduction is available under the overall 1.5 lakh limit under Section 80C, 123 of the proposed I-T Act under old tax regime. Principal repayment, stamp duty, registration fee and other expenses related to transfer of house property qualify for the deduction, under this limit.On Interest Paid: Three situations apply: the house is self-occupied, vacant or rented out. For a selfoccupied 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 under both tax regimes.Set-off and carry forward of loss: 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 under old tax regime or let-out) 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 years but can be set-off only against ‘Income from house property’. Notional rent: The concept of notional rent applies when an individual owns three houses or more. In such cases, two house properties are considered self-occupied and the remaining are treated as ‘deemed let-out’, thus attracting notional rent. This is based on the expected market rent and becomes a taxable income.ProsCons

• Heavy upfront costs such as down payment and registration, followed by property taxes and repairs
• House properties are illiquid as they cannot be sold quickly
• Property prices see fluctuations and may not fetch expect ed returns
• EMIs have to be paid regularly, irrespective of situations like loss of income