The salary-rent parity

There are many properties available for rent and at interesting prices. All of them have a differentiating aspect in one way or the other. Most of the rents are close by you’re confused on what you want. You are not getting the value for money game yet and you want to make sure you’re not at the short end of the receiving stick. So how to calculate the rent percentage, what should be the rent that you must take to have a trade off?

They say the max you can pay towards your rent and utilities should not exceed 30% of you take home salary. There are other factors to consider like the security and commute aspects. Does the neighbourhood have a history of any bad incidents etc… Considering all these aspects it’s found that some individuals pay close to 50% of their salary as rent and that is not a profitable option. We need a place that is rent friendly and has the aspects discussed above.

HRA or House Rent Allowance under section 10(13A) of the Income Tax Act is executed in favour of individuals who live in a rented accommodation. Based on this you can claim an exemption on your income tax and you should also receive house rent allowance from your employer. The HRA is the lower of the actual HRA received or rent paid in excess of 10% of your basic salary.

But in most cases monthly rent exceeds the HRA exemption and it creates issues. In urban metros where most of the corporate population of India is residing you can see that the rents are higher and negotiation are lower. The demand for good living space is there. In such cases you need to understand your priorities. If you’re a family man, you can sacrifice some of the luxuries and find a suitable place where accessibility is not an issue. If you’re single you can take the required call and share with someone so as to distribute the overheads.

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