Understanding Housing Loan Tax Exemptions: How Do Construction Delays Affect You?

I have some queries related to housing loan exemptions. Please clarify the following questions as it would help me gain a clear understanding of tax implications:

1. If a person has taken a housing loan for a property that is not yet occupied, how should we consider the housing loan interest for tax purposes? How many years of housing loan interest payments can be considered for exemptions if the property has not been occupied due to ongoing construction?

2. Once the person occupies their own house, how should we calculate their housing loan interest for tax exemptions? How many years of housing loan interest should be considered for exemption?

With Regards,
Vasanth

Interest on Housing Loan and Tax Deductions

Interest on housing loan paid or payable during the year is deductible under Section 24 from the income from house property. Briefly, your query can be solved as follows:

Pre-Construction Interest Deduction

If the house is not fully constructed, interest on the loan up to the year of construction (excluding the year of construction) cannot be deducted now. It will be deductible after the completion of construction in five installments, beginning from the year in which it is completed.

Post-Construction Interest Deduction

If the house is fully constructed, the entire interest is deductible if it is let out. If it is self-occupied, interest up to 1.5 lakhs per annum is deductible. Interest for the pre-construction period is also deductible in five installments during the post-construction period.

Regards,
Rajiv

Self-Occupied Property

The assessee will get an exemption towards the interest paid on house property.

- If the property was purchased before 01/04/1999, an exemption will be given up to the tune of Rs. 30,000/- towards interest on house property.
- If the property is purchased on or after 01/01/1999, an exemption will be given up to the tune of Rs. 1,50,000/- towards interest on house property.

If the employee fulfills the following conditions, then they are eligible to claim house property as well as house rent exemption benefits:

- Due to their profession, if the employee is not in a position to occupy their self-occupied property.
- Both the house property and the rented property are situated in different places, i.e., different cities.
- If the assessee hasn't derived any rental income from the rental property.

Regards,
Vasant

Dear Pon, Sorry to disagree, but I believe that the limit of 1.5 lacs is applicable only in the case of self-occupied property.

Rajiv

Hello Loginmiracle, I just went through the attachment you posted last year, where it is mentioned about taking a joint loan by a couple, for which the tax benefit is calculated with 70% paid by the husband and 30% paid by the wife. Is there any rule for this percentage, or can this be decided by the couple? Please clarify. Other seniors can also help me. I am about to take a joint loan.

Regards

Sir,

I browsed through your notes and I have one doubt regarding the interest paid for the pre-construction period, i.e., pre-EMI. When the exemption is claimed after construction, the ceiling amount is 1.5 lakhs for the interest part for a self-occupied house. Does this ceiling include the 20% share of pre-EMI, or is the 20% share of pre-EMI exempted over and above the 1.5 lakhs, since that amount was actually paid during a different financial year?

Regards,
SURY6695

I have a house in Chennai and have taken a house loan. However, I am currently living elsewhere in the North. Am I not eligible to claim tax exemption for the interest part of the house loan I have taken? I am availing.

Pon