Income tax experts went on to add that a homebuyer can claim income tax rebate under Section 24(B) on home loan interest repayment before possession of the unit in next five years post-possession. But, the income tax rebate would not be available on home loan interest paid over ₹2 lakh in a single financial year.
Speaking on income tax rule on under-construction flats, Archit Gupta, Founder and CEO at Clear said, "The interest payable or paid to acquire or construct a house property is allowed only when the house is possessed by the taxpayer. However till the house is completed he can continue to pay the interest for the period and then claims such interest paid over a period of 5 years in equal instalments once the house is possessed by him. However, the interest claimed in such a way and the current year interest together shall not be more than ₹2 lakhs for self occupied property."
Explaining how a home loan borrower can claim income tax rebate on home loan interest paid before possession, Pankaj Mathpal, MD & CEO at Optima Money Managers said, "Under Section 24(B) of the Income Tax Act, a homebuyer can claim tax rebate on up to ₹2 lakh home loan interest paid in single financial year. After getting possession of the flat, the home buyer would be paying EMI and home loan interest together. However, with the phase of time, share of home loan interest in home loan EMI down and principal goes up. Hence, to avail maximum benefit available under the above mentioned section, one needs to first look at the home loan interest one would be paying in the assessment year. Then, one can add the whole home loan loan interest being paid before possession. As the rule allows taxpayers to claim rebate on home loan interest paid before passion for next five years post-possession, one can divide the whole amount in five parts and add one by one in next five years along with the home loan interest paid in the income tax assessment year."
For example, if a taxpayer has paid ₹4 lakh home loan interest in pre-possession phase and has to pay ₹1 lakh home loan interest in income tax assessment year, then as per the Section 24(B), one can claim income tax rebate on an additional ₹80,000 ( ₹4 lakh / 5) under Section 24(B) on home loan interest payment.
