Purchasing a new home can burn a hole in your pocket, as the real estate prices are continually increasing. Many people opt for home loans to enjoy a smooth process of moving into their new homes, as today, the house loan rates are highly affordable and come with additional benefits.
However, another way to reduce the financial burden of purchasing a house of your own is by availing of tax benefits for under construction property. Investing in an under-construction property can help you retain some cash, as there are a few tax exemptions you can apply for after acquiring the entirely constructed house. Besides, under-construction houses generally quote a lower price than constructed ones.
If you have chosen a house purchase financing option, then here’s how you can avail of home loan tax benefits for under construction property.
Tax deductions on under-construction property
If you purchase an under-construction property by taking a home loan, the Income Tax Act makes provisions for under construction home loan tax benefits. Suppose you buy a property that is being constructed and are currently paying the EMIs for the loan. In that case, you can claim the principal amount (up to Rs. 1.5 lakhs) as a tax deduction under section 80C of the ITA.
Also, an under-construction property is usually cheaper, so you can avail of competitive home loan rates to finance the purchase and repay the loan easily.
Tax deductions on interest paid pre-possession
Taking a house loan to purchase your dream home is now convenient and affordable, as you can claim thehome loan interest rate as a tax deduction. You can claim the interest paid on house loan before possession for a tax deduction, after the construction is complete and the property is ready for occupancy. You can claim an amount up to Rs. 2,00,000 in this case.
The interest you pay before possession gets accumulated. Once you claim a tax exemption on this interest, you can reclaim this amount in five instalments after the construction is completed. To have an exact estimate of this amount, you can use the home loan EMI calculator provided by your lender.
Additional Read: Which one is better? Under- Construction or Ready-to-Move-In House
Tax benefits on stamp duty
You can claim the amount paid towards stamp duty and registration charges under section 80C of the ITA. Additionally, if the property you are purchasing has a stamp duty under Rs. 45 lakhs, you can also avail of a tax deduction of up to Rs. 1.5 lakhs for interest paid on loan. This provision is made under section 80EEA.
Nowadays, several targeted home loan calculators are available to keep you abreast of all the rates and charges involved in a loan. Therefore, you can stay aware of the costs and choose wisely.
If you are looking to purchase a house, then make sure to check your home loan eligibility and reach out to Tata Capital for easy-to-fulfil- eligibility criteria. We have some of the most lucrative interest rates, starting from 8.5%.
Apart from this, you can avail of our home loan eligibility calculatorto enhance your eligibility parameters. Enjoy a quick disbursal and hassle-free documentation process with Tata Capital and move into your dream home without any delay!