IT Laws
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The approval of home loan is not the only thing, that can help you earn several tax benefits as the timely construction of residential property also play a vital role in availing several Income Tax benefits and thus it is important to keep a tab on the construction process. This article helps you understand the ways to avail Income Tax benefits by commencing the construction of residential property.

  1. Rebates Related to Repayment of Homeloan Principle Amount:

The property owners are eligible for Income tax benefits on the repayment of a principal amount up to rupees 1.50 lakhs under Section 80C. Those seeking IT rebate against home loan amount should know that the EMI – that is Equated Monthly Installment will not begin until you get the property possession. In case, the property is under or self-construction then the EMI deduction will commence only after the disbursal of a total home loan amount. But the delay in construction completion due to any reason after disbursal of the same can’t halt the EMI deduction.

In case of delay in construction, the person is not eligible to avail Income Tax benefit on the principal amount repayment as the rebate is only allowed on the property that is listed as taxable under the income from house property. Thus, you are likely to miss the IT rebate in case of delay in securing possession deadline.

  1. Rebate Related to Interest Paid on Availed Loan for Construction of Home:

Under Section 24 of Income Tax Act, you are eligible for IT rebate on the interest paid on the homeloan amount that you borrowed for completion of property purchase procedure/construction of property/renovation and repair of the same.  This clause is different from the above-mentioned section as here a person can enjoy Income tax benefit on the interest paid against the home loan before receiving the property possession. The interest paid prior to obtaining possession is known as Pre-EMI interest and is divided into five equal parts that begin from the year of construction completion.

The delay in construction completion will reflect in your right to claim for the interest paid on the loan amount. In case of a self-occupied home, the claim on interest paid will be fixed according to the tenure of construction completion.

  1. Benefits of Tax Rebate Claim Exemption on Capital Gains:

Section 54 and 54F of Income Tax law has the provision for exemption on long-term Capital Gains only in case this amount is used for the construction of a new home within three years. In case of delay in construction, completion will enable the right of Income tax officer to overview the claim of tax rebate after which the person/property owner has to file an appeal to higher authority for availing IT rebate.

  1. Conditions to Avail Maximum Income Tax Rebate:

Firstly, focus on completion of construction work within the five years from the closure of Financial Year in which the home loan is availed. The timely construction of a residential property can help you yield IT rebate up to rupees 2 Lakhs.

Secondly, the construction completion delay can cost you lesser IT rebate under the law and if the completion exceeds five-year term then you are only eligible for rupees 30,000 rebate yearly.

Thirdly, the amount of interest is accounted for the current year interest and the deducted Pre-EMI interest brought together.

Fourthly, a person can claim for complete interest benefit in case he/she hired a tenant for the same property. Remember that this is possible even if the construction completion is delayed.