Optimise Savings With Under-Construction Tax Benefits

• The under-construction period is defined as the period between the initiation of a home loan and the completion or possession of property.
• Sections 80C, 80EEA, and 24b are the key sections covering under-construction tax benefits.
• It is important to compare interest rates across lenders and evaluate your financial capability before taking an under-construction home loan.

Properties under construction usually quote a lesser price than completed ones, contributing to your savings. You can further enhance these savings by claiming the tax benefits of home loans for under-construction properties.Read on as we examine the relevant Income Tax provisions that can help you unlock tax savings.

Let’s begin by defining the prior period or under-construction period. It is the period between the initiation of a home loan and the completion or possession of property.
In other words, the property is not ready for use during this period and is being built. Under-Construction Tax Benefits Here are some of the top tax benefits on under-construction properties: Principal Portion If you take a home loan for a property under construction, you can claim deductions on the principal portion, under section 80C. The allowable deduction is up to ₹1.5 lakh provided you fulfil the relevant conditions. Interest Portion Deductions on the interest portion of your home loan for an under-construction property are governed by section 24b. However, you should note that a deduction for interest paid during the under-construction period is not allowed. You can claim it later in five equal annual instalments commencing from the year of completion. Also, the maximum allowable deduction is ₹2 lakh.After the completion of the construction, if your home loan still exists, you can claim a deduction of up to ₹2 lakh on the interest portion. Section 24b outlines the relevant provisions. Additional Benefits Section 80EEA offers additional benefits on interest payments subject to the fulfilment of relevant conditions and is applicable for properties with a stamp duty value of up to ₹45 lakh.You can claim a deduction of up to ₹1.5 lakh more, over and above ₹2 lakh under section 24b. This results in extra savings for first-time home buyers. However, you should not have ownership of any other residential property at the time of loan sanction.

While a home loan helps you get the house of your dreams, it is important to consider some aspects before availing of one. Here are a few things that will help you make an informed decision. Competitive Rates and Terms There are several lenders in the market offering home loan solutions at different rates and terms. Look out for competitive rates and terms that best suit your needs. Customised solutions usually offer greater flexibility. Assess Your Financial Capability Use an online home loan EMI calculator to get a fairly reasonable idea of the EMI obligations. This helps assess your financial capabilities. Compare the EMI amount across different tenures and discuss with your lender a loan term aligning with your finances.

It is essential to know the eligibility criteria, including the credit score. This helps you work towards eligibility to increase the chances of loan approval. For instance, if you have a low credit score, you can take measures to improve it and better qualify for the loan. Also Read: Home Loan Process - Step-by-Step Procedure to Get a Home Loan

Purchasing a home is a significant expense. However, with the available under-construction tax benefits you can manage your finances better. You can further enhance your financial management by availing of a loan from a lender offering competitive rates and a flexible repayment schedule.Talk to an Aditya Birla Capital representative to explore customised home loan solutions and maximise your savings.