Tax saving on home loans under section 24 B & 80 C
The interest component of home loans is allowed as deduction under Section 24 B for up to Rs.2 lakh in case of a self-occupied house. The principal amount in the repayment of a home loan can be added to the 80 C deductions with the limit of Rs.1 lakh for tax savings, so that the total deductions for tax savings can be up to Rs.5 Lakhs.
In case the housing loan is in the joint name of you and your spouse, each one can avail of Rs.2 lakh interest component deduction and Rs.1 Lakh each for deduction under 80 C. This limit is only for self-occupied house. For joint loan and self-occupied home, it is important to show the loan repayment by both husband and wife as they can avail of Rs.2 lakhs each on loan interest deduction and deduction of Rs.1 lakh each under 80 C. If the EMI is being paid from one account by ECS (electronic clearing service), pay your contribution of loan repayment to your spouse by cheque. It will help in case of IT assessment. In case your spouse does not have any income, only you can take Rs.2 lakh loan interest deduction.
If your property is rented out, you can deduct the full interest paid on the home loan. The rent on the property does become part of your income. If the rent is lesser than the loan interest, it will lower your overall tax liability. In any case, interest on loan offsets the rental income, which is good for tax savings.
You can avail of both the benefits of Home loan and HRA if you are paying rent on your accommodation and have also taken a home loan on your own home. This is subject to your home receiving rental income, which is taxable.
Your Chartered Accountant / Tax Consultant will be able to optimize your home loan options for the maximum tax benefit as per the prevailing income tax rules.
LOAN GUIDE FOR NRIS
The Non-Resident Indians (NRIs) are recognized under the Foreign
Exchange Regulatory Act, 1973. Every bank and housing finance companies
follow the RBI guidelines to define NRI -
"An Indian citizen who holds a valid documents like Indian passport and
who stays abroad for employment or for carrying on business or vocation
outside India or stays abroad under circumstances indicating an
intention for an uncertain duration of stay abroad is a NRI."
Broadly categorized, Non-Resident Indians qualifying for NRI housing loans are:
HOME LOAN FOR NON-RESIDENT INDIANS
Indian citizens who stay abroad for employment or for carrying on
business or vocation outside India or for any other purpose in
circumstances indicating an indefinite period of stay abroad;
Government servants who are posted abroad on duty with the Indian
missions and similar other agencies set up abroad by the Government of
India where the officials draw their salaries out of Government
Government servants deputed abroad on assignments with foreign
Governments or regional/international agencies like the World Bank,
International Monetary Fund (IMF), World Health Organization (WHO),
Economic and Social Commission for Asia and the Pacific (ESCAP);
Officials of the State Government and Public Sector Undertakings
deputed abroad on temporary assignments or posted to their branches or
Documents required for Resident Indians as well as for NRIs for
getting Home Loans are different in some respect. Home loans for NRIs
are available for construction of new house / flats, purchase of old
house / flat addition / alteration to an existing house and repairs /
renovation etc. NRIs can avail of loans by mortgaging an existing
residential property. However, for availing home loans, NRIs have to
fulfill certain conditions according to provisions of the Income Tax
Act. They should have stayed in India for a period of 182 days or more
within an assessment year or they should have stayed in India for at
least a total of one year or more.