Question ID : 39325

Interest on Housing Loan for under construction Property

A salaried Person has booked a Flat in Fin Year 2018-19 which is still under construction and posession is expected to be given after two years from now. He has taken housing loan, Partially availed according to requirement and EMI on that part has started in 2018-19 Fin Year . Should he claim interest after taking posession @ 20% per year then or there is any other way to claim interest deduction under House Property Loss in Fin Year 2018-19 itself

Refer to Explanation to section 24 clearly says " where the property has been acquired or constructed with borrowed capital, the interest , if any, payable on such capital borrowed for the period prior to the previous year in which the property has been acquired or constructed, as reduced by any part there of allowed as deduction under any other provision of this Act, shall be deducted under this clause in equal installments for the said previous year and for each of the four immediately succeeding previous years. Hence, the salaried person referred by you cannot claim the interest paid before taking the possession of the property though he started making payments of EMI. This is due to the wording in the section mentioned that acquired or constructed , so a competed task should be taken into account. Further, the bankers will start EMIs after giving moratorium period and they collect the interest part only, please check. Otherwise the deduction under section 80 C also will has to be forego by the assessee if the principle amount also includes in the EMI and starts repayment of EMI before taking the possession of the property.