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Tax benefits from an under construction home

Taking a home loan for an under construction apartment is quite beneficial as the customer can avail the deferred deduction on the interest payable during the pre-construction period. The loan seeker can avail the entire amount as deduction in equal installments starting from the financial year up to five years and till the construction is complete.

Tax exemption for an under construction property:

The pre-construction phase is the period which starts from the date of the borrowing and ending when the construction is completed. The Indian Income Tax Act states the conditions under which an employee with salary can claim tax rebate on the interest payment for the housing loan. The Section 24 of the Income Tax Act states that if a property is still to be constructed, there will not be any deductions on the interest payment all of those years. The interest for the pre-construction period can be availed for the deduction in the 5 equal installments from the year the construction is complete.

How can one avail tax benefits from an under construction property?

  • Section 80C allows tax benefit for the amount paid towards the Stamp Duty and the Registration process. However, the tax rebate on principal repayment may not be allowed when the property is under construction.
  • If there is a delay in the project and the possession doesn’t happen on the given date, one cannot get the tax benefit for the principal and the interest.
  • One can avail the tax benefits at the time of filing the income tax returns.

Explanation of the Section 80C:

This Section states that, for the purposes of purchase or construction of a residential house/property the income from which is chargeable to tax under the head income from house property (or which would, if it had not been used for the assessees own residence, have been chargeable to tax under that head), where such payments are made towards or by way of;

  •  Any installment or part payment of the amount due under any self-financing or other scheme of any development authority, housing board or other authority engaged in the construction and sale of house property on ownership basis; or
  • Any installment or part payment of the amount due to any company or co-operative society of which the assessee is a shareholder or member towards the cost of the house property allotted to him; or
  • Repayment of the amount borrowed by the assessee from

(1) The Central Government or any State Government
(2) Any bank, including a co-operative bank
(3) The Life Insurance Corporation
(4) The National Housing Bank

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4 Responses to “Tax benefits from an under construction home”

  1. Isaias Trotz says:

    Its so simple to get into a mess with back taxes, and then its so difficult to find your way back out.

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    Wow, wonderful blog layout!

  4. Maya says:

    Every one looks for Tax benefits while investing in property. Taking a home loan for an under construction property can be beneficial. Thansk for sharing about the tax benefits for investment on the pre-construction period.

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