Tax Benefits of Taking An NRI Housing Loan In India

Many NRIs are looking to buy property in India. A weaker Rupee is good news for non-resident Indians, as it increases their purchasing power. Also, non-resident Indians can easily get NRI housing loans in India. NRIs can only take advantage of the tax deductions if they have taxable income in India. If they have taxable income in India, Sections 24, 80C, and 80EE of the Income Tax Act allow them to deduct the repayment of interest and principal from their taxable income.

NRI Housing Loans in India

The Indian government offers numerous tax breaks to NRIs in India. As an NRI, you may be eligible for tax benefits through the Income Tax Act of India, 1961, when you use your NRI housing loan in India to purchase a home.

INR 150,000 Deduction Under Section 80 C

A yearly cap of INR 150,000 can be deducted from your taxable income to cover home loan interest, principal, and related fees under Section 80C. All loan registration fees and stamp duty paid in the first year (the year you buy or acquire a property) are eligible for a one-time tax reduction. You can deduct the interest you pay on your home loan principal beginning with the following tax year. Until the loan is paid in full, you get a yearly deduction of INR 150,000 every year under Section 80C.

Section 24(b) - Deduction Of INR 200,000

For non-resident Indians, Section 24(b) of the Income Tax Act offers a substantial tax break on a housing loan. According to this subsection, you can deduct up to INR 200,000 per year in interest payments from your taxable income. Again, this deduction is available for all NRI home loans, including home construction loans, every year until the loan is paid in full.

A maximum annual tax deduction of INR 30,000 is available if the building on the property is still in progress at the end of this period. However, in this case, you can only claim deductions under Section 24(b) if you finish building the residence within five years after the loan's disbursement.

INR 50,000 Deduction Per Section 80EE

Those purchasing their first home in India are eligible for additional subsidies from the central government. As a first-time buyer of a property financed by a housing loan, you are eligible for up to INR 50,000 in additional deductions. Section 80EE of the IT Act allows for this one-time write-off. More importantly, it is limited to housing loans with a maximum value of INR 35 Lakhs and properties with a maximum value of INR 50 Lakhs.

Tax Advantages On A Second Residence Acquired Through A Loan

When purchasing a second home in India using a loan, Non-Resident Indians are eligible for an additional incentive from the Indian government. You must pay any taxes due on the second home's earnings (rental tax, for example), but you can claim exemptions using the "self-occupied" tax status. It is possible to qualify for further tax breaks if you have already used a loan to purchase your primary residence and are now looking to purchase a secondary house. You can get tax breaks on the interest you pay, and there is no limit on how much you can claim.

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Things To Know About NRI Housing Loan In India

NRIs looking to buy a home can choose from various home financing options. The regulations and customs of one financial institution may differ from those of another.

Eligibility Standards for an NRI Home Loan

An NRI housing loan in India is available to salary and self-employed individuals. You can apply for a mortgage alone or with one or more co-applicants who may or may not be joint homeowners. However, all joint owners must be listed on the application. You can use a home loan to buy a new house, a previously owned property, or land to build your dream house. If you already have a home loan from another Indian financial institution, you may be able to refinance it or use the funds to buy a plot of land or make improvements or additions to your current home.

List Of Necessary Housing Loan Documents For NRIs

The following are the most important requirements for an NRI home loan application:

• Identification, current address, and income documentation are required.
• Authentic passport and visa photocopy.
• If the property has already been shortlisted, please include a copy of the allotment letter, purchaser agreement, or sales contract.
• All applicants must submit passport-sized pictures.
• Payment by cheque for the handling charges.
• If necessary, a power of attorney.

The Procedure For Getting NRI Housing Loan

Directly or through a power of attorney holder, submit the completed NRI home loan application form to the lender along with the required papers.

Borrowing Capacity

Loan amounts typically range from 75% to 90% of the property's purchase price. Your contribution would make up the difference.

Tenure

Depending on factors such as your age when the loan matures, the age of the property when the loan matures, and other stipulations, you may be eligible for a loan period of up to twenty years.

Rate of Interest

You may choose between an adjustable-rate mortgage and a fixed-rate mortgage (where the interest rate is fixed for the first two or three years but then changes to an adjustable rate for the remaining fifteen or twenty years of the loan's term). The home loan for NRI would be subject to the applicable interest rates.

Housing Loan Repayment

If you're interested in purchasing a property still in the construction phase, you need to pay the interest until the project is finished, and then you may begin making your EMI payments. On the other hand, you might choose to pay the whole EMIs up front by "tranching" the loan. When you buy a home that is already finished, you won't have to wait to start making payments on the mortgage. Your NRE/NRO bank account in India is required for all EMI payments. Any sum of the full existing loan balance may be paid off early without penalty. If you want to refinance your NRI housing loan in India, you should know that doing so may subject you to prepayment fees at your new financial institution.

NRIs Are Subject To Specific Regulations Regarding Ownership.

NRIs may own and possess immovable property in India, excluding agricultural land, plantation property, and farmhouses. Property purchases in India require authorisation from the Reserve Bank of India if you are a citizen of Afghanistan, Sri Lanka, Bangladesh, Pakistan, Iran, Nepal, or Bhutan (and such additional countries as may be notified from time to time). The Foreign Exchange Management Act of 1999 lays forth the fundamental requirements and limitations for NRI/OCI property ownership.

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Conclusion

NRI home loans can make owning your dream home in India possible. Since its value rises with time, this house might be a fantastic inheritance for your kids. Since home prices are expected to rise, now is a good time to lock in a low-interest-rate home loan. Please look at the properties being developed by Adani Realty if you are a non-resident Indian (NRI) interested in purchasing a house in India.