Chennaiites are cost conscious and quite frankly proud of it. This is why they opt for under-construction property as they are more affordable. But what the prospective buyer also needs to be aware of is that it comes with the disadvantage of restricted tax deduction claims. In the recent Union Budget, tax exemption on both principal repayment and interest payment on a home loan has been increased. But you cannot claim deduction for the interest if your property is still under-construction.
So how can you get tax benefit on home loan for under-construction property?
Magicbricks talked to several industry experts and this is their feedback – There is a way the consumer can get back the money later. This is what the current tax law states:
‘As per the prevailing tax laws in India the benefit of tax deduction on home loans is not applicable for properties that are under-construction; the benefits are available only on the constructed properties and only if the registration is done.’
Expert speak
“Once the construction of the property is completed, you can claim deduction for the interest paid during the pre-construction period,” says Vaibhav Sankla, director at H&R Block, an income tax services provider firm with offices across India and abroad. “This has to be done in five equal installments commencing from the financial year (FY) in which the construction of the property has been completed. Accordingly the deduction towards aggregate interest (including one-fifth of pre-construction interest) can be claimed from the FY in which the construction of the property is completed.”
Steps to take
- Once construction is over, calculate the total interest paid during the pre-construction period. The period to be considered here would start from the day you take the home loan and end on 31stMarch (that comes immediately prior to the date of completion of construction or date of repayment of the total loan), whichever is earlier.
- Make sure that while filing the income-tax returns, you separately mention the pre-construction interest claim in the relevant box and the interest paid during the year in another.
Source: Times of India / Kanchana Dwarakanath