Checklist For NRI Home Loan In India

Did you know that being an NRI, you can avail home loans in India? The RBI norms have made the home loan process and tax deductions simple in order to increase more investments in India.

The process to avail a home loan is simpler these days. It requires the applicant (NRI) to produce certain documents, proofs and meet the eligibility criteria.

Home Loan Eligibility
 

• The minimum age to avail a loan is 21 years

• NRI looking for a home loan should be a graduate

• He/She should have a stable job and should have a minimum income of US $2000 (Rs 1,21,210)

• His/Her EMI (Equated Monthly Installments) cheques have to be routed through his/her Non-Resident External (NRE) or Non-Resident Ordinary (NRO) Account. A savings account in India cannot be used.

• Assets, liabilities and number of dependents are also taken into consideration.

• An NRI can avail a loan ranging between Rs 5 lakhs to a crore depending on the cost of the property and his repayment ability. This requirement may vary as per the home loan institution. A maximum amount of 85% of the construction cost and 75 per cent in case of a plot can be availed as a loan amount.

• The tenure for loan repayment will differ as per the loan amount

Taxes
 
When buying a property in India an NRI needs to be aware of the extra costs and tax deductions that are attached to the property. There is also a certain amount that they can avail as tax rebate on the property bought. Here’s a list of the extra costs and tax deductions that you needs to be taken care of.

Taxes: An NRI has to pay the Stamp Duty and Registration fees for the property that he/she is buying. (Stamp Duty differs in every state) If the foreign country has the Double Taxation Avoidance Agreement (DTAA) with India, then he/she is not bound to pay double taxes.    

Income Tax: If the NRI possesses one property in his resident country and seeks to buy another property in India, then he/she is liable to pay income tax on the Indian property, whether or not the property is up for rent. But, if he does not have any other property, then it becomes income tax free. Again if he has two properties in India one will be treated as a rented house and income tax will be applicable on it.

Service Tax: For an under construction property, a service tax has to be levied on the overseas buyer. Generally, for a flat of 2000 sq.ft, a 12.36 per cent service tax is applicable on 25 per cent of the total price of the apartment whereas, for larger flats the tax rate is 12.36 per cent of 30 per cent of the total price of the apartment.
 
No Tax on Inheritance- If a non-resident Indian gets any property as part of inheritance then tax is not applicable. But if the value of the property is in excess of 30 lakhs after home loan deductions etc, then wealth tax needs to be paid. An exception of Section 5 of the Wealth Tax states that if the numbers of inherited properties in India count to be only one, then he/she doesn’t need to pay tax

Selling The Property- If the NRI wishes to sell off the property then he is bound to pay off the taxes on capital gains as per the Income Tax Act.

Tax Rebate: You can claim a tax rebate of Rs 1.5 lakhs on the income or rent amount and another Rs 1 lakh on principal amount of the loan.