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Can You Claim Tax benefits on under-construction property loans?

Posted on February 22, 2021 at 5:45 AM

Going for an under-construction property might take some time but comes with added financial advantages that can be crucial. For instance, the under-construction home loan can be beneficial, both at the time of purchase and when availing tax benefits from the government.

What does the Indian Income Tax Act have to say?

According to Section 80C of the Income Tax Act, a person who has taken a home loan for an under-construction property can opt for possible deductions on tax. The deduction is offered for a maximum of 2 lakh rupees on the year's interest payments and a maximum of 1.5 lakh rupees for the principal amount.

When is the tax benefit on loan not applicable?

There are some situations when the benefits surrounding home loans are not applicable. Here, the benefits cannot be availed if the home loan payments are made during the pre-construction phase. There are even cases where the customer has to pay nothing for the loan repayment EMI. In such situations again, the deductions of tax are not applicable.

Tax benefits that can be availed for an under-construction property

You can avail of the following tax exemptions on a home loan for an under-construction property:

Since it is known that under-construction properties cost lesser, you will need relatively low funds. As a result, the payable EMI for the loan undertaken would be comparatively lesser.

Since the EMI on loan is reasonable, the loan's monthly installments can be increased to reduce the loan tenor. It will, in turn, help in more significant reductions on the total payable interest.

Since you are availing of the home loan, you can postpone the deduction of the payable interest amount for the pre-construction phase.

When the interest amount that is to be paid before the year of completion is accumulated, one-fifths of this is allowed as the deduction every year for five years from the completion year. It can be calculated as the interest that is paid during the pre-construction phase in a total of five installments. If the property is taken before the five years are completed, the deduction can amount to a maximum of five lakhs. It proves to be one of the significant benefits when one goes for an under-construction property.

Another way for this is the coincidence where the project's time of completion coincides with the disbursement of each loan installment from the lender.

One can even opt for tax benefits on the registration fees and stamp duty regarding the property.


This is the complete guide that will help you understand tax benefits on the properties that are currently under construction. Anything like low credit score loans can be obtained for such properties, with monetary benefits, both in the present and in the future. Hope this was informative for you in understanding the tax benefits that can be availed for an under-construction property.


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