How to claim a tax deduction on under construction flat, what to keep in mind while filing ITR
Income Tax Rules: Under Section 24 (B) of the Income Tax Act, tax exemption can be taken on the interest paid on the home loan. This exemption can also be taken on the interest of the loan taken for the house under construction. The exemption can be claimed only after getting possession of the house.
Highlights
- The claim can be made under section 24(b) of the Income Tax Act.
- Rebate is available on paying interest of Rs 2 lakh annually in the financial year.
- There is no exemption for paying more than two lakh interest in a financial year.
New Delhi. Every taxpayer should take advantage of the exemption available in income tax. But, not everyone is able to take this advantage. The reason for this is the lack of knowledge of the rules. For this reason, one should be cautious while filing an income tax return and all tax exemption information should be collected beforehand. A home loan borrower can claim tax exemption on home loan interest payments under section 24(b) of the Income Tax Act. This exemption can be claimed after taking possession of the house. But taxpayers can get a rebate on the home loan interest paid before getting possession of the house. This deduction is also available on the interest paid for the under-construction house.
Tax experts say that the income taxpayer can claim this exemption for 5 years after getting possession of the house. But, if the interest paid on the home loan exceeds Rs 2 lakh in a financial year, then the home loan borrower does not get the benefit of this exemption. Tax experts say that installments can be exempted from the interest paid for the last 5 years.
According to
a Live Mint report, Clear’s Founder and CEO Archit Gupta says that claiming tax exemption on paying interest on home loan taken for acquisition or construction of a house or paying interest in the future. Can be done only after the meeting. He can pay interest until the construction of the house is completed. He can claim the rebate within five years of getting possession of the house.
Pankaj Mathpal, MD & CEO, of Optima Money Managers, says that the home loan borrower can claim income tax exemption on the home loan interest paid before possession under section 24(b) of the Income Tax Act. Home loan interest paid up to ₹ 2 lacks in a financial year can only be claimed.
After getting possession of the flat, the home buyer will pay the EMI and home loan interest together. Over time, the home loan EMI will reduce as the interest on the home loan increases and the principal amount increases. Therefore, to avail of the maximum benefit of Section 24(b), the taxpayer needs to look at the loan repayments made on the home loan in the assessment year and then add the entire interest paid before taking possession of the house. Rebate can be claimed by including the previous interest in the interest being paid every year in 5 installments for five years after getting the possession.
Here’s the math
For example, if a taxpayer has paid Rs.4 lakh as interest at the pre-possession stage and has to pay home loan interest of Rs.1 lakh in the Income Tax assessment year, Section 24(b) As per, that person can claim exemption on additional interest payment of 80 thousand rupees (₹ 4 lakh / 5) along with this 1 lakh.
