NRIs Home Loan Information
As we grow up, we all have dreams, and one of the most common dreams is to buy your own home. However, buying a home can be more complicated than it seems. Several steps and requirements need to be followed.
If you are an NRI and want to buy a home in India, it is crucial to grasp the intricacies of the NRI home loan process. We are here to equip you with the necessary knowledge about NRI home loans, empowering you to navigate the process with confidence.
Who Can Apply for NRI Home Loans?
Before you apply for a home loan as a non-resident, it's essential to know which category you fall into:
Non-Resident Indians (NRIs)
An NRI is an Indian citizen or someone of Indian origin who lives outside India for work, business, or another purpose and plans to stay abroad long-term. According to India's Foreign Exchange Management Act (FEMA) 1999, if an Indian has spent less than 182 days in India during the previous financial year, they are considered an NRI.
Person of Indian Origin (PIO)
A PIO holds an Indian passport but is not a citizen of countries like China, Iran, Nepal, Bangladesh, Pakistan, Sri Lanka, or Bhutan. They either held an Indian passport in the past or have parents or grandparents who were Indian citizens as per the Indian Constitution or Citizenship Act of 1955.
Overseas Citizen of India (OCI)
OCIs are foreign nationals with an OCI card that allows them to buy property in India, such as homes, businesses, farms, or plantations. They must complete all required paperwork and get the necessary approvals. Once they own property, they can keep it without needing permission from the Reserve Bank. OCIs can also give their property to someone in India, another NRI, or someone with an OCI card.
Documents Needed for NRI Home Loans
- Copy of your passport (essential pages)
- Copy of your visa or work permit
- Power of Attorney (POA) since you're not living in India
- Utility bills (like electricity, phone, or gas bills)
- Foreign driving license (optional)
- Government-issued ID, labor card, or social card from your country of residence
- Latest overseas bank statement showing your address abroad
- Employment contract, appointment letter, or any document that shows your job details
- Salary slip for the last three months
- Bank statement showing salary deposits over the previous six months
- Copy of prior year's tax return (not required for NRIs/PIOs in West Asian countries)
Once you know which category you fall into, you'll need to gather the following documents for your home loan application:
Tax Advantages for NRIs on Home Loans in India
NRIs can get tax benefits on home loans by filing an income tax return in India. Under Section 80C of the Income Tax Act, 1961, you can claim a tax deduction on the principal amount up to ₹1,50,000 per year. This means that a portion of the amount you pay towards the principal of your home loan can be deducted from your taxable income, reducing your tax liability.
You can also claim a deduction on the interest paid under Section 24, up to ₹2,00,000 per year. This means that the interest you pay on your home loan can also be deducted from your taxable income, further reducing your tax liability.
If the house is vacant in India, you can still claim these tax benefits. However, for the Section 80C deduction, you must have taxable income in India and file your tax return on time. This means that even if your house is not generating any rental income, you can still claim tax benefits on the amount you pay towards the principal and interest of your home loan, provided you have taxable income in India and file your tax return on time.
If the house is rented out, you can claim the entire interest paid on the home loan as a tax deduction.
Home Loan Period
The repayment period for NRIs is usually shorter than for Indian residents. For example, Indian residents can take up to 30 years to repay the loan, while NRIs typically have up to 20 years. This can vary depending on the bank.
Interest Rate for NRI Home Loans
The interest rate for NRI home loans is generally higher than for Indian residents because of the increased risk. The exact rate depends on the financial institution.
Income Requirements
To be eligible for an NRI home loan, you must have a minimum annual salary of ₹2,00,000. Understanding this income requirement will help you prepare and take the next step toward your dream home.
