5 TAX BENEFITS OF TAKING NRI HOME LOANS IN INDIA

Introduction

Non-Resident Indians get similar tax benefits like Resident Indians with subject to repayment of principal and interest component of home loans availed in India. However, before further discussion on deductions available to NRIs in terms of home loans, it is necessary to evaluate whether the tax deduction available in India would be beneficial to NRIs or not. NRIs can be benefitted from the tax deductions only if they have some income that is taxable in India. In case they have taxable income in India, they can claim deductions on the repayment of interest and principal component from the taxable income as per Section 24, 80C and 80EE of the Income Tax Act.

Tax Benefits Available to NRIs for Home Loans Availed in India

Below are 5 tax benefits related to NRI home loans availed in India : (Source: http://www.incometaxindia.gov.in/Charts%20%20Tables/Deductions.htm)

  1. As per Section 80C, the deduction is available with regard to the repayment of the principal component of home loans. The maximum deductions available as per Section 80C could be 150000 p.a.
  2. As per Section 24, the deduction is available for the repayment of interest on home loans up to 200,000 p.a. This deduction is available under the head ‘Income from house property’.
  3. For NRIs availing home loans in order to buy their first home, an additional deduction of up to 50,000 p.a. is available (subject to the fulfilment of certain conditions) with regard to repayment of interest on home loans as per Section 80EE.
  4. As per Section 80C, NRIs can also avail deductions for registration charges and stamp duty paid for acquiring their property.
  5. Section 24 also allows deduction pertaining to repayment of interest on NRI home loans, even though the property is in pre-construction phase.

Conclusion

Firstly, it is important to evaluate the need of tax savings for an NRI before getting involved in the discussion of tax deductions related to NRI home loans. In case the NRIs have taxable income from India; they can avail a home loan and buy a home in India by claiming the above mentioned tax benefits.

(Source : Yes Bank)

Eligibility

Individuals eligible for an NRI Home Loan

  • Profiles – Non Resident Indian (NRI), Person of Indian origin (PIO), Overseas Citizen of India (OCI), except Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, or Bhutan.
  • Age– Minimum age of the applicant should be 24 years. Maximum age limit is 60 years or retirement age (whichever is earlier), at the time of loan maturity.
  • Work experience– Applicant should have a minimum overseas work experience of six months with total work experience of 2 years
  • Minimum Income
    • For GCC Countries – AED 5000 – p.m. (or equivalent)
    • Other Countries & USA – USD 3000 -p.m. (or equivalent)
    • For Merchant Navy – USD 2000 p.m. for 9 months

Keep your documents ready

Documents required for an NRI Home Loan

  • Full passport copy and work visa copy
  • Overseas address proof e.g. utility bill, card statement, House lease agreement, bank statement etc.
  • Salary slip for three months
  • Appointment letter or contract copy
  • Salary a/c and NRE/NRO a/c statement for six months
  • General power of attorney

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(Source : Axis Bank)