NRI Tax Dilemma: Can I Use My Indian Savings Account for Home Loan and Rental Income?

I am an NRI from the U.S. I have a salary account (Savings A/C) in India, which was opened at the time of joining the Indian software company in Dec 2004.

1. I have a home loan that I obtained while in India, and I have set up an auto-debit option on my Savings A/C to pay monthly EMIs for this. I have not claimed tax exemption on this so far because I don't have any other income in India to receive the tax benefit. Can I show this on my tax returns starting this year, even though I am using an Indian savings A/C to pay the home loan EMIs?

2. I am going to occupy my residential flat (which was bought using the aforementioned home loan) this month and plan to rent it out to a private party (non-relatives) starting from April 2008. Can I keep this rental income in my present Savings A/C, and is it taxable?

3. I came to the U.S. in May 2006 and filed my tax returns (Form-16) for the year 2006-07 (1st April 2006 to 31st March 2007) by only showing my Indian salary (March, April & May 2006) and did not declare the overseas salary, which is taxable here. Is this correct?

4. My residential status is still not updated on either my Savings A/C or Home Loan A/C in India (Resident Indian only). I am also remitting money to my own savings A/C from here every month for my family's maintenance expenses and to pay home loan EMIs. Can I continue this?

5. I bought a house plot in India by transferring money to my own Savings A/C from here in 2007 as an NRI. Is this correct?

6. As explained above, I have used my India Savings account for all these transactions so far.

7. Is it mandatory for NRIs to conduct transactions in India using NRE / NRO A/Cs only, or is it optional?

8. What precautions need to be taken for the 2007-08 tax returns submission to rectify all these?

Based on the provided information, here are some key points to consider:

1. Tax Exemption on Home Loan: You can claim tax benefits on the home loan EMIs even if you are using an Indian savings account to pay them. Ensure you have the necessary documentation to support this claim.

2. Rental Income: The rental income from your property is taxable in India. It is advisable to maintain proper records of this income and consult a tax advisor to understand the tax implications.

3. Tax Returns: It is essential to accurately declare all sources of income, including overseas earnings, in your tax returns. Failure to do so can lead to penalties.

4. Residential Status: Updating your residential status in your Indian accounts is crucial for compliance purposes. Consult with your bank to make the necessary changes.

5. Property Purchase: Transferring funds as an NRI to buy property in India is permissible. Ensure you follow the regulations regarding property transactions for NRIs.

6. Account Types: While NRE/NRO accounts are common for NRIs, using a regular savings account is also allowed. However, understanding the differences and benefits of each account type is recommended.

7. Precautions for Tax Returns: For the upcoming tax returns, ensure you accurately disclose all income sources, update your residential status, and seek professional advice to rectify any past discrepancies.

It is advisable to consult with a tax advisor or financial consultant to ensure compliance with tax laws and regulations in both India and the U.S.