Tax Benefit For Under Construction House: According to the rules, you can avail the benefit of deduction on pre-construction interest in 5 installments from the financial year in which the house is ready and you get its possession.
Tax Benefit For Under Construction House: Everyone wants their own house. For this, people spend a large part of their hard-earned money. But many types of extra expenses create obstacles in fulfilling your dream of owning a house. One of these is tax. Amidst expensive raw materials and rising interest rates, taxes also prevent the common man from building a house. But if your house is under construction now, you may get some tax exemption. It is important that you have complete information about the tax exemption available under income tax rules. Know further how and how much tax exemption is available on under construction house.
Tax exemption rule on under construction house
Under Section 24(B) of Income Tax, you get the benefit of tax deduction on the interest you pay on home loan. However, if it is an under construction house then the rules are different for it. The interest paid on the loan you have taken for the house under construction is called ‘pre-construction interest’. The benefit of this interest tax deduction is not available immediately.
When and how to avail the benefit of tax deduction?
According to the rules, you can avail deduction on pre-construction interest in 5 installments from the financial year in which the house is ready and you get its possession. For this, it is necessary that the house work be completed within 5 financial years from the financial year in which you have taken the home loan. The benefit of deduction on interest on loan taken under Section 24(B) is available only when the house is ready.
How much is the benefit
First of all, you will not get the benefit of deduction on loan interest during construction. Secondly, although the benefit of tax deduction is Rs 2 lakh per year (maximum interest amount), but if the house is not built within 5 years, then this exemption will be reduced to Rs 30,000.
Keep this in mind
On a home loan taken for a house under construction, the bank will charge you interest on every payment made to the builder until the regular EMI starts. This interest is called Pre EMI.
Tax benefit on home loan
You can also avail deduction of up to Rs 1.5 lakh on loan amount repayment under Section 80C. But the benefit of 80C or 24(B) on home loan is not available under the new tax system.
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