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Can I get tax benefit on home loan during pre-construction period?


I’m employed in a PSU financial institution. I had booked a flat in Dehradun in 2017 by taking a house mortgage of 39 lakh. Until now I’ve not received possession of the flat. Please advise whether or not I’m eligible to say revenue tax profit throughout pre-construction interval in respect of curiosity paid in direction of residence mortgage. 

– Alok Kumar

In accordance with Part 24 of the Revenue Tax Act, 1961 (hereinafter known as ‘the IT Act’), the taxpayer wouldn’t be allowed to say the good thing about curiosity deduction until the development of the property is accomplished. Such curiosity which is paid by the taxpayer from the date of borrowing the housing mortgage to the tip of the monetary 12 months instantly previous the 12 months through which building is accomplished is often referred to as pre-construction interval curiosity and such pre-construction interval curiosity will be claimed as deduction in 5 equal instalments commencing from the 12 months through which the development is accomplished. Thus, with impact from the monetary 12 months through which the development is accomplished, the taxpayer can declare for each the curiosity paid throughout such 12 months in addition to the instalment of the pre-construction interval curiosity. Nevertheless, such mixed curiosity deduction shouldn’t exceed the utmost threshold restrict as talked about in S. 24 of the IT Act. Additional, the principal part of the mortgage repaid will be claimed u/s 80C of the IT Act despite the fact that the identical is paid in the course of the pre-construction interval.

Nevertheless, Part 80EEA of the IT Act offers for claiming of curiosity paid on housing mortgage as much as Rs. 1,50,000 (regardless of the restriction imposed by S. 24 on the pre-construction interval curiosity) on fulfilment of the next circumstances:

(i) The housing mortgage has been sanctioned in the course of the interval commencing from 1st April 2019 and thirty first March 2022.

(ii) The stamp obligation worth of the residential home property doesn’t exceed 45 lakh.

(iii) The person taxpayer doesn’t personal any residential home property on the date of sanction of mortgage.

Thus, if the person taxpayer is fulfilling the circumstances as talked about in S. 80EEA of the IT Act, he can be eligible to say the curiosity deduction even within the pre-construction interval.

Dr. Suresh Surana, Founder, RSM India. 

(Ship your queries at mintmoney@livemint.com)

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