ITR Filing 2024, Accounting Year 2024–2025 Income Tax Return Filing: Income tax returns must be filed by July 31st for the fiscal year 2023–2024. About their eligibility for income tax deductions and exemptions with regard to certain expenses and investments, taxpayers wrestle with a number of questions during this time of year. The ability to deduct interest from a home loan before taking possession of the property is one of the numerous questions that many borrowers for home loans must answer.
Tax treatment of home loans
Under certain sections of the Income Tax Act, you are eligible to receive tax benefits on house loans. You can deduct a maximum of Rs 1,50,000 from your home loan outstanding when you repay it under Section 80C. Even the property that is still under construction is eligible for this deduction benefit.
In addition to the Rs 50,000 deduction benefit on the interest amount paid under Section 80EE beyond the Rs 2 lakh limit under Section 24B, there is a provision under Section 24B that permits an income tax deduction of Rs 2 lakh on home loan interest payments. To be eligible for an additional Rs 50,000 tax deduction, borrowers must meet specific requirements set forth by the income tax authorities. One requirement is that the house must be under Rs 50 lakh in value and that you must be a first-time home buyer.
Can you deduct your income tax from home loan interest before you have the house?
“No” is the response. You cannot take use of the deduction on the interest portion of your home loan before your builder takes you possession of the house or apartment, according to income tax legislation.
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Regarding the house loan deduction benefit on interest for under-construction property, what is said in Section 24B?
According to income tax legislation, a borrower of a home loan may claim a deduction benefit under Section 80C for principal payments beginning in the first year of the loan, up to a maximum of Rs 1.5 lakh. This implies that a loan obtained for real estate that is still under construction qualifies for the Section 80C deduction. However, until the construction phase is completed and the buyer has ownership of the property, the tax laws prohibit claiming deduction benefits with regard to interest repayment.
After construction is finished, the interest payment deduction for the pre-completion period may be claimed in five equal installments over the next five years. Nevertheless, under Section 80B, the maximum deduction benefit for interest payments is limited to Rs 2 lakh each fiscal year.
To be eligible for the interest part of a home loan deduction, an occupancy certificate is required.
You will be able to deduct your home loan interest expense for the current year as well as the pre-completion period under Section 24B. To be eligible for a deduction benefit of Rs 2 lakh per year under Section 24B of the Income Tax Act, you must carry the occupancy or possession letter as proof of the completion of the home.
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