Home loan vs HRA claim in parent’s home

Calculator – Home loan vs HRA claim in parent’s home

Loan Amount 5000000
Loan interest % 0.095
Term (years) 15
Base Salary 100000
Tax slab 0.3
HRA ( 40% of base ) 40000
yearly EMI 626534.8097
Self Purchased Purchase via parent
yearly Section 24b tax saved 60000 Payment to parents 40000
Total payment 8498022.1458 HRA benefit - self 9000
Yearly tax saved - self 108000
Taxable income - parents 0
Total payment 7778022.1458

Home loan vs HRA claim in parent’s home explains if it’s financially better to take a home loan on self versus letting parents pay the loan and claim HRA benefit.
Few things to note here:
1. Section 24b, which allows tax exemption up to 2 lakhs on house loan interest amount.
2. Section 80CC, which allows tax exemption on principal amount is not that useful as most of the IT employees have already reached 1.5 lakhs limit by PPF and EPF.
3. HRA keeps increasing every year which can add more tax benefits.
4. The below calculation just points out the break-even point between 2 cases after which the HRA claim is more beneficial.
5. Once your HRA has crossed a certain amount, you will start getting the tax benefit and end up paying less to the loan company.

Please note that the calculation is only for illustration purposes. Please check with your financial advisor before making any decision. Author or website is not responsible for any loss or legal issues that may occur due to steps taken

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