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  • Category: Tax Planning

    Tax rebate on home loan pre construction interest


    Are you searching for how ot get rebate on home loan pre construction interest? Looking out for answers online? No worries, scroll through this page and decide how to split the interest in several instalments.

    I had taken a home loan of Rs 6 lakhs in Aug 2016 and repaid it with interest by Dec 2017. The construction of home will be over by Dec 2019. After that I am planning to ask for tax rebate for the home loan preconstruction interest under Sec 24. The total preconstruction interest is Rs 40000. Can I ask tax rebate on entire Rs 40000 at once or do I need to split in in five equal instalments if Rs 8000 each per year?
  • Answers

    2 Answers found.
  • Interest on housing loan can be claimed for tax deductions under section 24 of income tax.

    As per tis section there are provisions of deduction of home loan instalment from the income of the borrower but these deductions are only allowed once the construction is complete or possession of the house is taken. As per the rules once the property is acquired, the past interest paid on the capital borrowed can be shown in five equal instalments starting from the following year of the property acquisition. Of course you will have to obtain the loan repayment statement depicting the year wise interest component from the lender to substantiate your claim.

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  • I want to add further and supplement my answer for more clarity in the matter.

    If you have repaid the loan before the construction and acquiring of your house then even after acquiring it you can take the benefit of deduction of interest amount in 5 equal yearly instalments in the following years. In case of self occupied house, as in your case the house is constructed in less than 5 years from the year in which loan was taken, you will be allowed for a interest amount deduction of up to Rs 2 lakhs in a year from your income. In case you take possession of the house after more than 5 years from the year of taking loan then your maximum deduction will be limited to only Rs 30000 in a year in place of Rs 2 lakhs.

    This rebate/ deduction is admissible also if you rent your property. In that case there is no limit and whatever the interest (one of the 5 equal yearly instalments) it can be deducted from the rent received in a year and in case rent is lesser the balance will be set off against your other income.

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