Hi,
Interest deduction can only be claimed after receipt of possession by you. you cannot claim interest deduction before that.
Provision of income tax rebate on home loan under subvention scheme
Hi, I booked a flat in Bangalore with a reputed builder in 2012. This purchase was made under a Pre EMI scheme offered by builder wherein the buyer was to pay 20% of the cost as down payment for the flat and remaining 80% of the fund was to be financed by bank to builder. We (bank, builder and buyer) had entered into a tripartite agreement. The deal was that the builder would give the procession of flat in 36 months from the date of agreement and pay the interest component of the loan to the buyer every month for 3 years. The buyer in turn would add the principle amount to the above mentioned interest payment made by builder and pay the EMI amount to the bank. The bank released the balance 80% cost of Apartment to the builder at the time of agreement. Builder stopped paying the interest component after 36 months as per agreement and since Dec 2015 I am paying the entire EMI from my side to the bank. The builder has still not handed the project and keeps on giving fresh dates for handover. The new date is Dec 2020. My question is that as now I am paying the full home loan EMI, can I get the exemption of ₹ 2 Lakhs on the interest payments made in a year, and ₹ 1.5 Lakhs towards the principal amount under Section 80C of the Income Tax Act. Till date I have not claimed any exemption as I had assumed that this exemption can only be availed once the property is handed over and registration is done. Is this true? If not how can I get the above mentioned exemptions particularly the exemption on the interest payment as normally the exemption under 80C is exhausted by EPF contribution and Insurance. Please advice. Best regards.
Asked 5 years ago in Income Tax
As far as interest is concerned it is only available when you get the possession but the same is not mentioned for principal.
Also with regard to interest paid by you during construction period is available to you if the construction is complete within 5 years but in your case I don't think you'll even get that.
So you'll have to fight for it as it's the failure on part of builder.
Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.
Thank you
Dear Sir,
Hope you are doing well !!
Deduction on account of interest is classified in two forms, viz., interest pertaining to pre-construction period and interest pertaining to post-construction period.
Post-construction period interest is the interest pertaining to the relevant year (i.e., the year for which income is being computed).
Pre-construction period is the period commencing from the date of borrowing of loan and ends on earlier of the following:
➣ Date of repayment of loan; or
➣ 31st March immediately prior to the date of completion of the construction/acquisition of the property.
Interest pertaining to pre-construction period is allowed as deduction in five equal annual instalments, commencing from the year in which the house property is acquired or constructed.
Thus, total deduction available to the taxpayer under section 24(b) on account of interest will be 1/5th of interest pertaining to pre-construction period (if any) + Interest pertaining to post construction period (if any).
Hello,
Both the interest deduction and principal repayment deduction for the home loan are available only after the completion of the construction of the house property.
Interest paid during the pre-construction period is available as a deduction after the completion in equal parts during 5 years after completion.
I hope that this answer satisfies your requirements.
Regards,
CA Hunny Badlani
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