Tax on under construction house property

If you have secured a home loan for the flat, its repayment schedule is treated as pre-EMI (equated monthly instalment) till you get the propertyΓÇÖs possession. 

Section 88 allows tax rebate only in respect of a house property which is capable of being taxed under ""income from house property"". A house under construction therefore does not make the grade.

A buyer is entitled to tax rebate under sections 24 (b) and 80 (c) of the Income-Tax Act 1961, after securing possession of the property and thus commencement of EMI. Till then, he gets no tax relief on the pre-EMI. 

For the purposes of purchase or construction of a residential house property the income from which is chargeable to tax under the head Income from house property (or which would, if it had not been used for the assessees own residence, have been chargeable to tax under that head), where such payments are made towards or by way of 

(a)    any instalment or part payment of the amount due under any self-financing or other scheme of any development authority, housing board or other authority engaged in the construction and sale of house property on ownership basis; or 

(b)    any instalment or part payment of the amount due to any company or co-operative society of which the assessee is a shareholder or member towards the cost of the house property allotted to him; or 

(c)    repayment of the amount borrowed by the assessee from 

(1)    the Central Government or any State Government, or

(2)    any bank, including a co-operative bank, or

(3)    the Life Insurance Corporation, or

(4)    the National Housing Bank, or

(5)    any public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes which is eligible for deduction under clause (viii) of sub-section (1) of section 36, or

(6)    any company in which the public are substantially interested or any co-operative society, where such company or co-operative society is engaged in the business of financing the construction of houses, or

(7)    the assessees employer where such employer is an authority or a board or a corporation or any other body established or constituted under a Central or State Act, or

(8)    the assessees employer where such employer is a public company or a public sector company or a university established by law or a college affiliated to such university or a local authority or a co-operative society; or 

(d)    stamp duty, registration fee and other expenses for the purpose of transfer of such house property to the assessee, but shall not include any payment towards or by way of 

(A)    the admission fee, cost of share and initial deposit which a shareholder of a company or a member of a co-operative society has to pay for becoming such shareholder or member; or

(B)    the cost of any addition or alteration to, or renovation or repair of, the house property which is carried out after the issue of the completion certificate in respect of the house property by the authority competent to issue such certificate or after the house property or any part thereof has either been occupied by the assessee or any other person on his behalf or been let out; or

(C) any expenditure in respect of which deduction is allowable under the provisions of section 24;

[user=2]yedhulaprakash[/user] wrote: "[size=2 iYECS=""54"" CcXTn=""0""]If you have secured a [url=https://firstappeal.com/reply.php?topic_id=813&post_id=1878&quote=1#][color=blue]home loan[/color][/url] for the flat, its repayment schedule is treated as pre-EMI (equated monthly instalment) till you get the propertyΓÇÖs possession. 

Section 88 allows tax rebate only in respect of a house property which is capable of being taxed under ""[url=https://firstappeal.com/reply.php?topic_id=813&post_id=1878&quote=1#][color=blue]income[/color][/url] from house property"". A house under construction therefore does not make the grade.

A buyer is entitled to tax rebate under sections 24 (b) and 80 (c) of the [url=https://firstappeal.com/reply.php?topic_id=813&post_id=1878&quote=1#][color=blue]Income-Tax Act[/color][/url] 1961, after securing possession of the property and thus commencement of EMI. Till then, he gets no tax relief on the pre-EMI. 

For the purposes of purchase or construction of a residential house property the income from which is chargeable to tax under the head Income from house property (or which would, if it had not been used for the assessees own residence, have been chargeable to tax under that head), where such payments are made towards or by way of 

(a)    any instalment or part payment of the amount due under any self-financing or other scheme of any development authority, housing board or other authority engaged in the construction and sale of house property on ownership basis; or 

(b)    any instalment or part payment of the amount due to any company or co-operative society of which the assessee is a shareholder or member towards the cost of the house property allotted to him; or 

(c)    repayment of the amount borrowed by the assessee from 

(1)    the Central Government or any State Government, or

(2)    any [url=https://firstappeal.com/reply.php?topic_id=813&post_id=1878&quote=1#][color=blue]bank[/color][/url], including a co-operative bank, or

(3)    the Life Insurance Corporation, or

(4)    the National Housing Bank, or

(5)    any public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes which is eligible for deduction under clause (viii) of sub-section (1) of section 36, or

(6)    any company in which the public are substantially interested or any co-operative society, where such company or co-operative society is engaged in the business of [url=https://firstappeal.com/reply.php?topic_id=813&post_id=1878&quote=1#][color=blue]financing[/color][/url] the construction of houses, or

(7)    the assessees employer where such employer is an authority or a board or a corporation or any other body established or constituted under a Central or State Act, or

(8)    the assessees employer where such employer is a public company or a public sector company or a university established by law or a college affiliated to such university or a local authority or a co-operative society; or 

(d)    stamp duty, registration fee and other expenses for the purpose of transfer of such house property to the assessee, but shall not include any payment towards or by way of 

(A)    the admission fee, cost of share and initial deposit which a shareholder of a company or a member of a co-operative society has to pay for becoming such shareholder or member; or

(B)    the cost of any addition or alteration to, or renovation or repair of, the house property which is carried out after the issue of the completion certificate in respect of the house property by the authority competent to issue such certificate or after the house property or any part thereof has either been occupied by the assessee or any other person on his behalf or been let out; or

(C) any expenditure in respect of which deduction is allowable under the provisions of section 24;

"
Dear Sir


Thank you for your reply and clarifying the situation.
However, as you rightly mentioned, that tax exemption qualifies only after possession for the pre-EMI paid during the year of construction(i.e only after actual EMI starts).
However, I would like to emphasize that I have been paying the actual EMI (and not pre-EMI) even for the under construction house. This is as per the loan scheme extended by SBI, wherein the EMI is started from the day of first disbursement of the part payment. All the calculations, i.e interest and principal from the EMI is same as it would have been, had it been a constructed house with full disbursement.
SBI has even issued a certificate stating the EMI amount and the split of the amount into the principal and interest deducted from the same.
Would this scenario qualify for the income tax deduction u/s 80C and 24B?


Please guide me on the same

Waiting for your reply

Thanking you in anticipation

Indrani Chakraborty