NRI or Non-Residential Indians love the homeland even if they stay away from the country for any reason. Finding home loan in India is easier than any other country. Apart from this, the Real Estate demand is on the rise and everyone wants to invest. Home Loans are the most availed loans in India and almost everyone has at least one home loan going on. It takes a lot to buy a home in India as the rates are always sky high. In such a situation people try to take as much advantage by availing the many tax benefits that the government has passed on to the individuals. However, for NRIs who wish to invest in Indian properties, there are different tax rules that apply.
Let us look at 5 tax benefits that NRIs can avail for taking a home loan in India.
1.Basic Tax Deduction
The tax benefits for NRIs and resident individuals are the same. So if you avail a home loan you are eligible for a tax deduction for Rs. 2,00,000 per year on your total income. The tax bracket is for income above Rs. 2,50,000. So, if your income is Rs. 5,00,000 then the Rs. 2,00,000 will be deducted for home loan irrespective of the interest paid above this amount. and the remaining Rs. 3,00,000 will be considered for taxation out of which Rs. 2,50,000 will be tax-free and you need to pay tax on Rs. 50,000 only. This deduction comes under section 24. Although there is not much of a difference if compared to the ones living in India, it is a benefit for both categories of investors.
2.Principal Repayment Deduction
The tax laws are also beneficial for the principal amount that you pay for the NRI home loans. This is exempted up to Rs. 1,50,000 under section 80C. So if you have to make a tax payment on Rs. 50,000 as in the above example, this will be reduced and no tax will be demanded on your income. That sounds good. Also if your principal amount does not go up to 1.5 lakhs then you can make a top-up payment towards your loan on the Principal amount and avail the dual benefit of reduction in the principal amount and tax benefit as well. This can be one factor for NRIs to invest in Real Estate in India.
3.50K Additional Benefit
This is an additional benefit for home buyers who have availed the loan for the first time. They can avail 50k extra over the section 24. This comes under section 80EE and can be availed if the price of the property is less than 50 lakhs and the loan amount is less than 35 lakhs. This benefit can be availed until the loan repayment continues. It is a lucrative option that an NRI can opt for.
4.Stamp Duty And Registration Charges
This benefit can be availed by NRIs who have purchased a property in India irrespective of them taking a home loan or not. This can be availed under section 80C.
Indian home buyers pay pre-construction EMI which starts as and when they avail the home loan. This can also be possible with NRIs. So, they can avail the section 24 benefit for up to 2 lakhs only in the financial year when the construction gets over.
All these benefits are available only if you pay Income Tax in India and not otherwise. The tax deductible is on the income generated in India and will be set off against it when you file your tax returns.
The best part of NRIs investing in home loans is that till the time they have paid the EMIs, they will be away and as the house is ready for possession, whenever they are back to India, they can either live there or rent it. Moreover, the value of a home, especially of a new home gets higher every year till the time possession has been acquired. It looks like an investment that can pay you more if you think of reselling the home.
No matter, you have ample of tax benefits or not, the return, in the long run, is luring.