For the past three months I am paying EMIs on a home loan, but the possession of the house will come to me only next year in August. Will I still be eligible for the tax exemption against the loan repayment in this financial year?
The tax benefit can be claimed from the financial year when the house is fully constructed
For the past three months I am paying EMIs on a home loan, but the possession of the house will come to me only next year in August. Will I still be eligible for the tax exemption against the loan repayment in this financial year?
Alapatti Venkatesh, Vizag
Congratulations on the new home. When it comes to home loans, the tax benefits allowed are on two aspects – the principal and the interest component. The condition to claim tax benefits stipulate that the tax benefit can be claimed from the financial year when the house is fully constructed. So, if you will get the possession in August 2018, we are assuming that the construction will be complete only about then, which means you cannot claim the full tax benefits in 2017-18.
However, any interest paid prior to the financial year in which construction or acquisition is completed, can be claimed in five equal instalments, from the financial year in which the property is completely constructed. So, in your case, the interest component of the loan that is repaid till March 31, 2018 can be claimed in five equal instalments starting from 2018-19, with the assumption that the construction is completed and you are in possession of your fully constructed house in August 2018. In future, the deduction that you are entitled to claim will also depend on whether the house is occupied by you or let out on rent.