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I am a non-resident. I have taken a home loan from reputed bank for a house which is let out. I have approximately ₹500,000 income from rent which is credited in my Non-Resident Ordinary (NRO) account. Please let me know if I am eligible for any tax benefits against my home loan. Let me know the tax filling process too.
Answer: The rental income is taxed under the head “Income from house property”. From the gross rental income, you are allowed to deduct municipal taxes paid by you. A standard deduction of 30% of the bet amount after deduction of municipal taxes is allowed for repairs etc. irrespective of expenses incurred on it.
A further deduction is also allowed in respect of interest paid on money borrowed to buy or to repair or renovate the house. Since the house is rented out, the entire interest payable without any ceiling is deductible from the rent received. However, loss under the head “Income from house property” can only be set off to the extent of two lakh rupees against your other income during the year and any unabsorbed loss, if any, is allowed to be carried forward for set off against income under the house property head for next eight years.
An additional deduction under section 80C of the Income Tax Act within overall limit of Rs. 1.50 lakhs is also available in respect of repayment of the principal amount. This deduction is available only on loans taken from specified institutions for acquiring or constructing a residential house property.
You have to file an income tax return in India if your total taxable income from all sources in India before claiming any deductions under Chapter VIA which comprises of Section like 80C, 80D, 80CCD, 80G, 80TTA etc. exceeds the basic exemption which is Rs. 2.50 lakhs for all non-residents.
Balwant Jain is a tax and investment expert and can be reached on jainbalwant@gmail.com and @jainbalwant on Twitter.
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