By Rameesh Kailasam & Jharna Kamdar
India’s rapidly evolving job market sees many young professionals migrating to cities in search of employment, leaving behind the comfort of their homes and settling into rented accommodation. With the emergence of competitive furniture and appliance rental startups offering flexible tenure plans and affordable pricing, doing so has now become a practical alternative, especially for professionals in the early stages of their careers.
Data from the Employees’ Provident Fund Organization (EPFO) released in November 2024 highlights a significant increase in new members joining the formal workforce. This trend reflects the rapid urbanisation and growing workforce mobility shaping India’s economy. A substantial proportion of these professionals are relocating from smaller towns to metros and Tier 1 cities, where they face the additional financial burden of furnishing their new homes. Initial furnishing costs often range between Rs 1.5-2 lakhs, equivalent to 8-10 times their monthly salaries.
In response to these financial pressures, many professionals are opting for rental furniture and appliances instead of outright purchases. Rental options offer greater flexibility and affordability, making them particularly appealing to individuals who frequently relocate for work. The EPFO data shows that around 13-15 lakh employees switch jobs monthly, many of whom also relocate. This movement has driven a surge in demand for rental subscriptions, evidenced by a sharp increase in online searches for furniture and appliance rentals during the first half of FY24 (April-September). These trends highlight the growing reliance on rental services to meet the needs of a transient, cost-conscious workforce.
While the government revises income tax slabs regularly, provisions under House Rent Allowance (HRA) need to evolve with the changing needs of a mobile workforce. Recognizing furniture and appliance rentals as part of HRA exemptions could provide much-needed financial relief and align tax laws with the realities of today’s urban professionals.
HRA is one of the most common allowances received by salaried employees in both the private and government sectors. The Income Tax Act provides for a deduction related to the House Rent Allowance (HRA) paid to employees. This exemption is governed by Section 10(13A) of the Income Tax Act and Rule 2A of the Income Tax Rules. However, these exemptions are restricted to rental payments for housing and do not extend to furnishing. While furnished accommodation is available in urban areas, the significantly higher rental rates often make this unaffordable for young professionals with modest incomes. Consequently, many employees are left with no choice but to rent unfurnished properties and shoulder the additional costs of furnishing them.
The shift towards furniture and appliance rentals also reflects broader changes in consumer preferences. Environmental sustainability has become a significant concern for today’s younger generations. According to the Deloitte 2024 Gen Z and Millennial Survey, climate change ranks as one of the top issues for both these cohorts, with 62% of Gen Z and 59% of millennials expressing concerns about its impact. These individuals are increasingly mindful of their consumption patterns, actively seeking out sustainable products and services.
They evaluate company practices, with 3 in 10 researching environmental policies before making purchases and roughly two-thirds willing to pay a premium for sustainable products.
Furniture and appliance rental companies align closely with these values, operating within the framework of the circular economy. By promoting the reuse of furniture and appliances, these companies address the need for sustainable consumption models. The circular economy seeks to reduce waste by extending the life cycle of products through reuse, refurbishment, and recycling. This approach stands in stark contrast to the traditional “take-make-dispose” economic model, which has dominated consumer markets for decades.
Expanding HRA provisions to include furniture and appliance rentals could yield several benefits. First, it would alleviate the financial burden on young professionals who are already spending significant relocation and furnishing costs. Second, it would encourage sustainable consumption by promoting the reuse of household assets, aligning with Prime Minister Narendra Modi’s Mission LiFE. Third, it would boost the growing furniture and appliance renting sector. Recognising furniture rentals under HRA exemptions could generate employment in related industries, including refurbishment, maintenance, and repair, while also boosting increase in GST collections from this sector.
Recognising furniture and appliance rentals under HRA exemptions would provide crucial financial relief, support the circular economy, and unlock growth in the furniture and appliance renting sector. By addressing this issue in the upcoming Union Budget, the Government has an opportunity to create a more inclusive and supportive framework for India’s workforce, ensuring that tax policies reflect the realities of modern urban living.
The writers are respectively CEO and associate-Public policy and Research, Indiatech.org.
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