Investing in an under-construction property offers not only affordability but also significant tax benefits under the Income Tax Act 1961. Understanding these benefits can help you maximize your savings while fulfilling your dream of owning a home. In this guide, we delve into the details of Sections 24B, 80C, 80EE, and 80EEA, exploring how each provision can reduce your tax liability when buying an under-construction property in India.
Under-Construction Property Tax Benefits Explained
Section 24B: Interest on Home Loan
Section 24B of the Income Tax Act allows for a deduction of up to Rs. 2 lakh per annum on the interest paid on a home loan for an under-construction property. This deduction becomes applicable from the financial year in which the construction of the property is completed and possession is taken. The deduction includes interest paid during the pre-construction period, divided over five years starting from the year of possession.
Key Points:
- Amount: Up to Rs. 2 lakh per annum.
- Eligibility: Available once possession is obtained.
- Conditions: Property must be completed within 5 years from the end of the financial year in which the loan was taken.
Section 80C: Principal Repayment
Under Section 80C, you can claim a deduction of up to Rs. 1.5 lakh per annum on the principal repayment of the home loan for an under-construction property. This deduction can be claimed starting from the year in which the construction of the property is completed and possession is taken.
Key Points:
- Amount: Up to Rs. 1.5 lakh per annum.
- Eligibility: Available post-possession for principal repayment.
- Conditions: Property must not be sold within 5 years from possession.
Section 80EE: Additional Deduction on Interest
Section 80EE provides an additional deduction of Rs. 50,000 per annum on the interest paid on a home loan, over and above the limit of Rs. 2 lakh under Section 24B, subject to certain conditions.
Key Points:
- Amount: Up to Rs. 50,000 per annum.
- Eligibility: Available for first-time homebuyers.
- Conditions: Loan sanctioned between FY 2013-14 to FY 2016-17; property value not exceeding Rs. 50 lakh; loan amount not exceeding Rs. 35 lakh.
Section 80EEA: Further Deduction on Interest
Introduced to boost affordable housing, Section 80EEA offers an additional deduction of Rs. 1,50,000 per annum on the interest paid on home loans, beyond the Rs. 2 lakh limit under Section 24B and Rs. 1.5 lakh under Section 80C.
Key Points:
- Amount: Up to Rs. 1,50,000 per annum.
- Eligibility: Available for first-time homebuyers.
- Conditions: Loan sanctioned between FY 2019-20 to FY 2021-22; property value not exceeding Rs. 45 lakh; carpet area limits apply.
Claiming Under-Construction Property Tax Benefits
To claim these tax benefits, ensure you have the necessary documents such as loan sanction papers, possession certificates, and completion certificates. File your tax returns accurately, mentioning the deductions under the relevant sections of the Income Tax Act.
Conclusion
Investing in an under-construction property not only offers financial benefits through lower prices but also significant tax savings through various provisions of the Income Tax Act. By understanding and leveraging Sections 24B, 80C, 80EE, and 80EEA, you can reduce your tax liability effectively while realizing your dream of homeownership. To construct your dream home with Brick & Bolt, contact us today and let’s build your future together.