I am employed in a PSU bank. I had booked an apartment in Dehradun in 2017 by taking out a home loan of ₹39 million. So far, I have not taken possession of the apartment. Please advise if I am eligible to apply for a tax benefit during the pre-construction period with respect to interest paid on the home loan.
-Alok Kumar
Pursuant to section 24 of the Income Tax Act 1961 (hereinafter referred to as “the Computers Act”), the taxpayer would not be entitled to claim the benefit of the interest deduction so long as the construction of the property is not complete. Such interest which is paid by the taxpayer from the date the home loan is borrowed until the end of the financial year immediately preceding the year in which the construction is completed is commonly referred to as pre period interest. -construction and such pre-construction period interest may be claimed as a deduction in five equal installments commencing with the year in which construction is completed. Thus, from the financial year in which the construction is completed, the taxpayer can claim both the interest paid during this financial year and the installment of the interest of the period preceding the construction. However, such combined interest deduction must not exceed the maximum threshold mentioned in Article 24 of the IT Law. In addition, the principal component of the repaid loan may be claimed under Section 80C of the Information Technology Act, even if the same is paid during the pre-construction period.
However, Section 80EEA of the IT Act provides for the claiming of interest paid on the home loan up to Rs. 1,50,000 (regardless of the restriction imposed by Section 24 on pre -construction) on the fulfillment of the following conditions:
(i) The housing loan was sanctioned during the period from April 1, 2019 to March 31, 2022.
(ii) The stamp duty value of the dwelling house property does not exceed ₹45 million.
(iii) The individual taxpayer does not own any residential property on the loan sanction date.
Thus, if the individual taxpayer fulfills the conditions mentioned in Article 80EEA of the IT Law, he could claim the interest deduction even during the pre-construction period.
–Dr Suresh Surana, Founder, RSM India.
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