Tax: Tax exemption on under-construction houses also! Know how to avail benefits on home loan interest
Everyone desires to build a dream house with their hard-earned money. But heavy taxes come in the way of fulfilling this wish. The process of building a house is going on and the pockets are also getting loose, on top of that the burden of tax? But wait, smile a little! Yes, even if your house is under construction, you can still avail income tax exemption. Let us know how.
Under Section 24(B) of the Income Tax Act, there is the benefit of deduction on interest paid on home loans. But, in the case of a house under construction, it is a little different. The interest paid during this period is called 'pre-construction interest' and is not immediately deductible. You will have to wait a little to get this deduction.
You can reduce this pre-construction interest in five equal installments from the financial year in which the construction of the house is completed and you get its possession. Tax expert Manikandan S says that under Section 24(B), deduction of interest on borrowed capital is available only when the house is constructed. However, you can deduct the interest payable for the year preceding the year of purchase or construction of the property over five years. This period starts from the financial year in which you have purchased the property or its construction is completed. The construction work should be completed within five years from the end of the financial year of taking the home loan.
When will you get the discount?
Remember, this exemption will be available only when your house is ready and you get possession of it. No deduction can be taken on this during construction. Kunal Verma, CEO and co-founder of Fio advises that to claim this rebate, ensure that your house is completed within five years from the end of the financial year in which you took the loan. If this does not happen, the maximum deduction limit will be Rs 30,000 instead of Rs 2 lakh.
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