If you take a home loan for an under-construction property, you cannot claim tax deductions during the construction phase. All housing loan tax benefits, including principal repayment, regular interest, and accumulated pre-construction interest, begin only after the financial year in which the construction was fully completed. To avail of the income tax rebate on a housing loan, you must have taken possession of the property. Once you meet these conditions, you can add the total interest paid during the construction phase and claim it in five equal yearly installments. <\/em><\/strong><\/p>\n\n\n\n The tax benefits for an under-construction home loan can be claimed only after the construction is completed and you have taken possession of the property.<\/p>\n\n\n\n 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<\/a> to enjoy a smooth process of moving into their new homes, as today, the house loan rates<\/a> 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.<\/p>\n\n\n\n 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 fully constructed house. Besides, under-construction houses generally quote a lower price than constructed ones.<\/p>\n\n\n\n Here\u2019s how you can avail of home loan tax benefits for under-construction property.<\/p>\n\n\n\n The prior period or under-construction period refers to the time between the initiation of a house loan and the completion of the property or possession. The property is being built during this phase but is not ready for possession or use.<\/p>\n\n\n\n During this period, you cannot deduct the loan interest you pay in this time. However, you can claim this interest in five equal installments starting from the year of completion or acquisition.<\/p>\n\n\n\n If you purchase an under-construction property by taking a home loan, you can avail of home loan tax benefits for under-construction property.<\/p>\n\n\n\n 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.<\/p>\n\n\n\n Also, apart from deductions on the principal amount, you can also claim tax benefits on your home loan interest payments.<\/p>\n\n\n\n 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.<\/p>\n\n\n\n Yes, you can claim deductions on the interest paid on the house loan before possession<\/a>, 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.<\/p>\n\n\n\n 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.<\/p>\n\n\n\n Home buyers claim benefits on interest paid even in the pre-construction period under special circumstances.<\/p>\n\n\n\n The Section 80EEA<\/a> 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 fulfill the following conditions:<\/p>\n\n\n\n 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\u2019s interest even before the construction is complete.<\/p>\n\n\n\n To have an exact estimate of this amount, you can use a home loan EMI calculator online<\/a>.<\/p>\n\n\n\n You can claim an income tax rebate on a home loan on the amount paid towards stamp duty<\/a> and registration charges under Section 80C<\/a> of the ITA. However, the benefit is only available after the construction has been completed and you are in possession of the property.<\/p>\n\n\n\n Key conditions and rules<\/strong><\/p>\n\n\n\n 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.<\/p>\n\n\n\n Section 24B of the Income Tax Act provides tax benefits on the interest component of the home loans. For a home loan for a ready-to-move-in property, you can claim a deduction of up to Rs. 2 lakhs annually on the interest paid on your home loan.<\/p>\n\n\n\n In the case of under-construction properties, you can claim a deduction on the interest payments made while the construction is ongoing, only once the construction is complete and the property is ready for possession. You can claim this deduction in five equal installments only after the completion of the property construction.<\/p>\n\n\n\n Once the construction is complete and you\u2019re still repaying the home loan, you can claim tax benefits up to Rs. 2 lakhs in a financial year on the interest repayment, as usual, under Section 24B.<\/p>\n\n\n\n These benefits help reduce taxable income, providing significant tax savings for homeowners and making home loans more affordable.<\/p>\n\n\n\n Buying an under-construction house can offer several tax benefits. These include:<\/p>\n\n\n\n Together, these provisions can help reduce your taxable income and lower the overall cost of buying an under-construction home.<\/p>\n\n\n\n Section 80EEA provides additional tax benefits for borrowers on payments made towards interest repayment during the pre-construction phase if they meet specific criteria.<\/p>\n\n\n\n Under this section, you can claim an additional deduction of up to Rs. 1.5 lakh on the interest paid on home loans for properties with a stamp duty value of up to Rs. 45 lakh. This benefit is over and above the Rs. 2 lakh deduction under Section 24B.<\/p>\n\n\n\n However, to be eligible, the loan must be sanctioned between April 1, 2019, and March 31, 2022. The property should be an under-construction house, and the taxpayer should not own any other residential property at the time of loan sanction. This provision aims to promote affordable housing and ease the financial burden on first-time homebuyers.<\/p>\n\n\n\n When you buy an under-construction home, GST on under-construction property is an added cost to factor in. As per current GST rules for property, GST is applicable on under-construction properties but not on ready-to-move-in homes with completion certificates. This tax directly impacts overall under-construction property costs.<\/p>\n\n\n\n Apart from GST, you should also plan for additional charges a home purchase may involve. These include stamp duty, registration charges, maintenance deposits, parking fees, and society charges.<\/p>\n\n\n\n Construction delays can change how and when you claim tax benefits on your home loan. Delays can affect your home loan tax benefits if possession is pushed beyond the expected timeline, extending the pre-construction period tax rules. While you continue paying interest on the home loan, some tax benefits may have to wait until construction is completed and you receive possession.<\/p>\n\n\n\n Here\u2019s how delays affect you:<\/p>\n\n\n\n During construction, you may have to pay pre-EMI, which mainly covers the interest on the amount already disbursed. A longer construction period means you may continue paying pre-EMI for an extended period without being able to use the property.<\/p>\n\n\n\n Construction delays can postpone your home loan interest tax benefits.<\/p>\n\n\n\n If you continue living in a rented house while paying pre-EMI or EMI on your under-construction home, your monthly housing expenses can rise. This can put pressure on your budget until you receive possession.<\/p>\n\n\n\n If the lender\u2019s repayment schedule starts before construction is complete, you may have to pay full EMIs even though the property is not ready. As a result, the delay can increase your financial burden.<\/p>\n\n\n\n Long delays can increase project costs due to higher material and labor prices. In some cases, this may result in additional financial requirements, increasing the overall cost of owning the property.<\/p>\n\n\n\n Claiming interest on under construction property works differently from ready-to-move homes. During the construction phase, you cannot immediately claim interest paid on your home loan.<\/p>\n\n\n\n Here\u2019s how it works:<\/p>\n\n\n\n An under-construction property home loan needs careful planning as construction delays can increase your interest, rent, and overall borrowing cost. You must check your loan eligibility, compare lenders, and use a home loan EMI calculator to plan repayments.<\/p>\n\n\n\n Key rules and conditions<\/strong><\/p>\n\n\n\n How to claim?<\/strong><\/p>\n\n\n\n Tip:<\/strong> Keep your loan agreement, sale agreement, payment receipts, and interest certificate safely for claiming the benefits. Compare lenders on interest rates, fees, repayment terms, and disbursement conditions before applying.<\/p>\n\n\n\n There are various income tax benefits on home loans for under-construction property. So, if you\u2019re planning to construct a home, then make sure to check your home loan eligibility, calculate the EMI with a home loan EMI calculator 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<\/a> to enhance your eligibility parameters. Visit Tata Capital website<\/a> or download the instant loan app<\/a> 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!<\/p>\n\n\n\nWhat is the prior period or under-construction period?<\/strong><\/h2>\n\n\n\n
What are the tax deductions on under-construction property?<\/strong><\/h2>\n\n\n\n
What are the tax deductions on interest paid pre-possession of the property?<\/strong><\/h2>\n\n\n\n
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What are the stamp duty benefits on under-construction properties?<\/strong><\/h2>\n\n\n\n
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What are the home loan tax benefits under Section 24B?<\/strong><\/h2>\n\n\n\n
What are the tax benefits for an under-construction house under Section 80C?<\/strong><\/h2>\n\n\n\n
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What are the tax benefits for an under-construction house under Section 80EEA?<\/strong><\/h2>\n\n\n\n
What are the GST and additional charges on under-construction property?<\/strong><\/h2>\n\n\n\n
How do delays in construction affect your home loan tax benefits?<\/strong><\/h2>\n\n\n\n
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How to claim interest on under-construction property?<\/strong><\/h2>\n\n\n\n
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What are the key considerations while availing of an under-construction property home loan?<\/strong><\/h2>\n\n\n\n
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Wrapping up<\/strong><\/h2>\n\n\n\n