Tax Benefits on NRI Home Loans in India

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Key Takeaways

You may be an NRI now, but you may wish to spend your golden years in your homeland. An NRI home loan is the key to leading a financially secure retired life in India for such individuals. Like resident Indians, you can avail of tax benefits under various sections of the IT Act, including Section 80C, 24(b), and 80 EE. Read on to find out more about NRI Home Loan tax benefits.

As an NRI, you may be residing overseas to make the most of employment opportunities. But you may wish to return to your homeland sometime in the future. To this end, you may decide to use your foreign earnings to buy a property in India. However, your residency status may have you wondering whether you can find lenders to fund your property in India. Not only can you find Home Loans and lenders willing to fund your dream of buying a home in India, but you can also benefit from all kinds of tax deductions available to Resident Indians on Home Loans. This article lists out all the NRI Home Loan tax benefits you should be aware of. Read on to find out.

NRI Home Loan Tax Benefits

Any Indian origin individual, whether a Resident or an NRI buying a property in India, can enjoy several tax benefits on their investments. With NRI Home Loans in India, you can claim tax deductions under various Sections of the Income Tax Act of India, 1961. These include:

Section 80 C – Deduction Of INR 150,000

Under Section 80C, you can get an annual income deduction of a flat INR 150,000 on your Home Loan expenses and repayment. You can avail of this one-time deduction on the loan registration charges and stamp duty in the first year, i.e., the year of buying/acquiring a property. From the next year onwards, you avail of this tax deduction on the principal repayment component of your home loan. You can continue to get 80C deductions of INR 150,000 per annum until your loan is repaid in full.

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

Another massive NRI Home Loan tax benefit is available under Section 24(b). Under this section, you may claim income tax deductions of up to 200,000 per annum on the interest repayment component of your Home Loan. Once again, you may claim this deduction each year, until the end of the loan repayment tenure, for all kinds of Home Loans, including Home Construction Loans. However, for the latter, you may avail of Section 24(b) deductions only if you complete the construction of the property within five years of loan disbursement. If property construction is incomplete during this term, you can only claim tax deductions of up to INR 30,000 per annum.

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Section 80EE – Deduction Of INR 50,000

The Indian Government offers further benefits to those individuals buying their first property in India. As a first-time homebuyer – a home funded through a Home Loan, you can get additional deductions of up to INR 50,000. This one-time deduction is available under Section 80EE of the IT Act. Further, it is applicable only for Home Loans valued up to INR 35 lakhs, with the property value not exceeding INR 50 Lakhs.

Tax Benefits On A Second Home Purchased Through A Loan

For both Resident Indian and NRI Home Loans, there is an additional benefit the Indian Government provides when you buy a second house through a loan. If you already bought your first home through a loan and are planning to buy a second one, you can avail further tax benefits. Essentially, you can claim tax benefits on the entire interest amount payable, with no specific cap on it. While you have to pay the applicable tax on the income earned on the second home (tax on rental income, for instance), you may show the second house as self-occupied and avail tax exemptions.

Making The Most Of NRI Home Loan Tax Benefits

You can enhance your NRI Home Loan tax benefits by applying for the loan jointly with another close family member such as your parents, spouse, or children. Both you and your joint applicant can claim income tax deductions under each of the above sections individually. Thus, if you apply for the loan jointly with another applicant, you would each qualify for income deductions of 150,000 and 200,000 under Sections 80C and 24(b), respectively. This translates to total tax savings of 150,000 x 2 = 300,000 and 200,000 x 2 = 400,000, i.e., 700,000 per annum.

Note that Banks typically require that the joint applicant for an NRI Home Loan be a Resident India. You may also have to assign a Power of Attorney to fulfill all loan specific formalities on your behalf.

Conclusion

With NRI Home Loans in India, you can spend your golden years in your homeland in your own home. This property can be an incredible asset for your children, as its value increases with time. With real estate rates sky-rocketing, now is the best time to take out a Home Loan and secure your future.

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*Disclaimer: This article is published purely from an information perspective and it should not be deduced that the offering is available from DBS Bank India Limited or in partnership with any of its channel partners.

The purpose of this blog is not to provide advice but to provide information. Sound professional advice should be taken before making any investment decisions. The bank will not be responsible for any tax loss/other loss suffered by a person acting on the above.