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Tata Capital > Blog > Loan for Home > Income Tax Benefit on Home Loan for Under-Construction Property

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Income Tax Benefit on Home Loan for Under-Construction Property

Income Tax Benefit on Home Loan for Under-Construction Property

Purchasing a new home is a dream for many, but it can be tough on the pockets as real estate prices are continually increasing. That is why most 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. Also, there are several income tax benefits on home loans that one can avail of, making them a popular way to finance the purchase of properties. 

Apart from income tax rebates on home loans, another way to reduce the financial burden of purchasing a house of your own is by availing of an under-construction home loan with tax benefits. 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.

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, you can avail of home loan tax benefits for under-construction property.

Suppose you buy a property that is being constructed and are currently paying the EMIs for the loan. In that case, you can claim tax deductions on the principal amount (up to Rs. 1.5 lakhs) under Section 80C of the Income Tax Act, 1961.

Also, apart from deductions on the principal amount, you can also claim tax benefits on your home loan rate payments. 

Additional Read: Can I Claim Income Tax Exemption on Loan Taken for Under-Construction Property?

Tax deductions on interest paid pre-possession of the property

Taking a house loan to purchase your dream home is now more convenient than ever, as you also get exemptions for interest on housing loans under Section 24 of the Income Tax Act. Combined with tax exemptions on the principal amount, a home loan for under-construction property makes your dream house more affordable. 

Yes, you can claim deductions on the interest paid on the house loan before possession, albeit after the construction is complete and the property is ready for occupancy. If the construction is still underway or you use the loan to purchase a plot, you cannot claim any exemption for interest on a housing loan. Section 24 also puts a limit on benefits you can claim, and you can only claim an amount of up to Rs. 2,00,000 in this case.

Meanwhile, the interest you pay before possession gets accumulated. Once you claim a tax exemption on this interest, you can reclaim this amount in five installments after the construction is completed. To have an exact estimate of this amount, you can use a home loan EMI calculator online.

Additional Read: Which one is better? Under- Construction or Ready-to-Move-In House

Tax benefits on stamp duty

You can claim an income tax rebate on home loan on the amount paid towards stamp duty and registration charges under section 80C of the ITA. However, the benefit is only available after the construction has been completed and you are in possession of the property.

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 the loan. This provision is available to homeowners under section 80 EEA of the Income Tax Act.

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.

Income tax benefit on home loan’s interest in the pre-construction period

As you know, Section 24 of the Income Tax Act allows you tax benefits on interest paid on home loans, but only after the construction is complete. However, home buyers claim benefits on interest paid even in the pre-construction period under special circumstances.

The Section 80EEA of the Income Tax Act allows you to claim a deduction on interest paid on a housing loan up to Rs. 1,50,000 regardless of the restrictions of Section 24, given you fulfil the following conditions:

  • Your housing loan was sanctioned during the period starting between 1st April 2019 and 31st March 2022.
  • The residential house property’s stamp value does not exceed ₹45 lakh.
  • You do not own any residential house property on the date of sanction of the loan.

If you tick all the above boxes, your home loan on the under-construction property will be much more affordable. You would be eligible for income tax benefits on the home loan’s interest even before the construction is complete. 

Wrapping up

There are various income tax benefits on home loans for under-construction property. So, if you’re planning to construct a home, then make sure to check your home loan eligibility and reach out to Tata Capital for a quick loan. We offer home loans at some of the most competitive interest rates and flexible tenure.

Apart from this, you can use our home loan eligibility calculator to enhance your eligibility parameters. Visit Tata Capital website and apply for home loans online, right from your home. Enjoy a quick disbursal and hassle-free documentation process with us and move into your dream home without any delay!

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