What is pre-construction period?||Home loan tax benefit

What is pre-construction period?

While computing income chargeable to tax under the head “Income from house property” in case of a let-out property, the taxpayer can claim deduction under section 24(b) of income tax act on account of interest on loan taken for the purpose of  construction of home, purchase, repair, renewal or reconstruction of the property.

[Deductions from House Property Income – Section 24] Treatment of Pre-acquisition/Pre-construction period Interest

Deduction on account of interest is classified in two forms, viz, interest pertaining to house pre-construction period and interest pertaining to post-construction period.

[Section 24 of Income Tax Act AY 2018-19] Income From House Property Questions

Post-construction period interest is the interest pertaining to the relevant year ( relevant year mean the year for which income is being computed).

(Interest Repayment Made in the Current Year) Post Acquisition Period Meaning

Pre-construction period is the period commencing from the date of Take of loan and ends on earlier of the following:

-Date of repayment of loan; or

-31st March immediately prior to the date of completion of the construction/acquisition of the house property.

Interest pertaining to pre-construction period is allowed as deduction in 5 equal annual installments, commencing from the year in which the house property is acquired or constructed.

Thus, total deduction available to the taxpayer under section 24(b)​​ of income tax act on account of interest will be 1/5th (fifth part) of interest pertaining to pre-construction period (if any) + Interest pertaining to post construction period .​

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