In a major victory for the District of Columbia, Congress yesterday gave final approval to legislation removing a legal cloud from the city's decade-old home rule charter and making it more difficult for Congress to overturn local legislation.

The home rule legislation ends more than a year of uncertainty over the city's authority to govern itself, a problem that arose from a 1983 Supreme Court ruling invalidating legislative vetoes, and it prevents the city from being plunged into financial chaos.

It also is intended to prevent hundreds of D.C. criminal convictions from being overturned on the basis of the Supreme Court ruling.

"It is one of the most significant things that has happened in the District since home rule itself," said D.C. City Administrator Thomas Downs.

Under the bill, legislation approved by the D.C. City Council and the mayor could be overturned only by a majority vote of both houses of Congress and the president's concurrence.

This is more difficult than the original oversight system by which Congress could veto criminal laws with a majority vote of only one house and other District laws with a majority vote of both houses.

Congress also approved the District's budget and federal funding for fiscal 1985, which started 12 days ago. Both measures were included in Congress' catchall continuing spending resolution, given final approval by the Senate yesterday and sent to the president.

The president will sign the bill, an administration spokesman said.

Approval of the home rule measure will free the city to issue nearly $600 million in tax-exempt bonds to take care of short-term cash needs, to refinance old loans, and for construction projects throughout the city. This is estimated to save the city millions of dollars a year in interest costs.

The projects to be financed include street repairs, sewer lines, public housing projects, Metro construction, school renovations and improvements to the Blue Plains sewage treatment plant and Lorton prison facility.

The D.C. City Council approved legislation last summer for the issuance of up to $150 million in short-term bonds needed to give the city cash while it waits for tax revenues to come in; $167.5 million in bonds for fiscal 1985 for capital construction projects; and $277.4 million in bonding authority to refinance 30-year Treasury notes from 1981 and 1982 at lower nistration.

The Justice Department had wanted the federal government to retain more control over D.C. criminal code changes and proposed that any passed by the city be enacted only if a majority of both houses of Congress approved them and the president concurred. The suggestion, made about a year ago, stunned city officials who said it would be a reversal of home rule.

But the administration, in a surprising policy reversal, dropped its opposition to Congress' approach to the problem two weeks ago.

Under the corrective legislation, Congress would have a review period of 60 legislative days for D.C. criminal legislation and 30 days for noncriminal legislation. If no disapproval was voted in that time, the laws would automatically go into effect as passed by the District. A disapproval would require a majority vote of both houses and the president's signature.

"It means the city is the city again," said Sen. Charles McC. Mathias (R-Md.), chairman of the Senate Governmental Affairs subcommittee on the District, through a spokeswoman. "It can now . . . .go back to operating the way it was intended to 10 years ago."

In the decade since home rule was enacted, Congress has overturned only two pieces of District-approved legislation.