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Home Loan Tax Benefits for Under Construction Property

Have You Invested in an Under-Construction Property? Check the Tax Benefits Here

Benefits for Under Construction Property Home or housing loan is undoubtedly the most cost-effective loan option in India – not only does it provide you with low-interest funds for house purchase or construction, but it also enables you to claim tax deductions under many different Sections of the Income Tax Act.

Moreover, since the price of an under-construction property is usually 20% to 30% lower than fully constructed houses, you can save even more. A home loan interest calculator can be your best friend during the journey to find tax benefits for under-construction property.

The Features and Tax Benefits of a Home Loan for An Under-Construction Property

The following are the features and benefits of a home loan for an under-construction property:

  1. Since an under-construction property’s price is often lower than a fully-constructed property, both housing loan interest and the EMIs will likely be lesser.
  2. Since the home loan, EMI is more affordable, you may increase the monthly repayment amount to close the loan earlier and avail of the benefits of a lower interest rate. Use a home loan interest calculator to modify the amount.
  3. You may also defer home loan interest deduction during the under-construction period. You may start claiming tax deductions, under Section 24(b), on interest payment for five years from the construction completion date.

    However, if you start living in the house before the completion of five years, the tax benefits on the interest component will be limited to INR 2 lakh per financial year. Use a home loan interest calculator any time to determine the interest cost and savings.
  4. A key feature of a home loan for under-construction properties is that the lender disburses the fund periodically, depending on the construction progress. The lender discusses the construction plan with the lender and transfers a fixed amount in different phases of the construction.
  5. You can also claim a tax deduction of up to INR 1.5 lakh for the home loan’s principal component. You can claim this deduction in addition to the INR 2 lakh deduction under Section 24(b).
  6. You can show up to two properties as self-occupied. However, the tax benefits on the housing loan interest component will be capped at INR 2 lakh every financial year.
  7. If you have intentions to rent out the property, you can claim a standard deduction from the rent of up to 30% from the municipal taxes you paid.

    Moreover, you can claim a tax deduction up to INR 2 lakh as a loss under ‘Income from House Property.’ If the loss under ‘Income from House Property’ is more than INR 2 lakh, you can carry it forward for the next eight years.

Conclusion

A home loan interest calculator gives you an accurate estimate of housing loan interest. You can also find out more about home loan tax benefits from your lender. 

However, an essential thing you must know is that the Indian Tax laws do not allow you to claim tax benefits during the pre-construction period. If you have already started paying the interest, you can claim it for five years from the date of the completion of construction.

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