The joy of owning your own home cannot be expressed in words. But then, with soaring property prices, not many are fortunate to fulfill this dream of theirs. Hence, making the payment at a single go seems difficult for most. So, what’s the way out? Well, you can count on the housing loan in order to simplify the process of purchasing a house.
Many private and nationalized banks provide housing loan. Additionally, you will also find a couple of housing finance organizations that provide housing loan. The greatest advantage of opting for a home loan is that you can save tax and proceed towards property investments. In other words, home loan tax benefits are too many too name. By opting for a house loan you fulfill the eligibility criteria for tax benefits under the Section 24(b) and Section 80(c) of the Income tax regulations.
Section 24(b) acquaints you with the “interest paid” of the housing loan whereas Section 80(c) acquaints you with the "Principal Repayment" of the housing Loan. The tax deductions may be availed at 1.5 lakhs for the interest paid and 1 lakh in a specific financial year where you are/will be filing the returns.
Another point that can be included in home loan tax benefits is that if you are applying for a joint home loan with your spouse, child or parent then you can avail the tax rebates simultaneously. The tax benefits are applicable as per the loan amount granted in case of a joint loan. For example, if you and you and your partner have applied for the loan in 3:2 ratios, then the loan amount (consider the amount to be 50 lakhs) will be divided in the ratio of 30 lakhs and 20 lakhs respectively. Hence, by opting for a joint home loan, you will not only improve your loan eligibility but will also maximize your tax rebate.
TAX Benefits for NRI
Non Resident Indians(NRI) can take loans for building a house or for buying a plot or house in the country. The NRI Home Loan is available to Non-Resident Indians and for the purposes of home loans, all Housing Finance Companies, go by the definition of NRI as given by RBI. The definition states that, an Indian citizen who holds a valid Indian passport and who stays abroad for employment or carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad. NRIs cannot claim Tax Benefits on home loans in India as they have to pay tax in the nation where they work and earn. Moreover, you need to file tax returns to become eligible for home loans. If they pay tax in India for income earned in India, they can claim tax rebate for the home loan and enjoy the Tax Benefits.
Interest rates for NRI home loans do not vary much from that of the Indians living in this country. But the loans is sanctioned only for a shorter period. NRIs get 85% of cost of home as loan amount. The size of the loan depends upon the borrower's repayment capacity.
The home loan applicant may be issued up to 36 times of the gross monthly earnings as home loan.
The re-payment can be made as Equated Monthly Installments (EMI) through Non - Resident Ordinary account or the Non Resident External Account. For security, most banks insist that the first mortgage of the property should be in their name. If the property is under construction then adequate additional security is required such as guarantee of third party, either resident or non-resident.
If you are planning to purchase an under construction property then ensure claiming for tax benefits post construction. You will have to pay rental income tax if you want to let your house on rent. Acquiring a housing loan is profitable for your tax planning. So, ensure making the most out of your home loan tax benefits.