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Pre-construction interest on housing loan

SAURABH KABRA (CA Business) (24 Points)

19 July 2015

As per income tax act pre-construction interest is allowed as deduction in 5 equal installments. The post construction interest is allowed as deduction in self occupied house property upto Rs. 2 Lacs.

I purchased an under construction apartment for self occupation in Nov 2014 with posession to be recd in March 2015 using a housing loan. Between Nov 2014 & March 2015 I will expend Rs. 400,000 as pre construction interest. From April 2015 I will have an annual interest outflow of Rs. 350,000. Therefore in FY 2015-16 can I claim as deduction

a. Rs. 280,000 - Interst on Housing loan Rs. 200,000 (since self occupied I will not be able to claim the entire Rs. 350,000) + Rs. 80,000 (1/5 of pre-construction interest of Rs. 400,000)

b. Only Rs. 200000

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4 Replies

Nikhil Kaushik (Fellow CA) (86410 Points)
Replied 19 July 2015

only Rs 2 lakhs. this limit is inclusive of pre-construction interest.

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CA. Roopali Kadam (Jobs on assignment basis.) (1459 Points)
Replied 19 July 2015

If you are receiving possession in Previous Year 2014-15,

Int paid during P. Y. 14-15 wont be considered as pre construction int.

And you have to claim benefit u/s 24 for PY 14-15 itself

Explanation.—Where the property has been acquired or constructed with borrowed capital, the interest, if any, payable on such capital borrowed for the period prior to the previous year in which the property has been acquired or constructed, as reduced by any part thereof allowed as deduction under any other provision of this Act, shall be deducted under this clause in equal instalments for the said previous year and for each of the four immediately succeeding previous years:

I am not expert, wait for others view

Akhil Sharma (Service) (141 Points)
Replied 20 July 2015

I agree with Roopali. Since you got the possession of the house in March 2015, it means that there is no pre construction period in your case. You can claim Rs.2 lakhs in FY 2014-15 and another Rs.2 lakh in 2015-16.