19 January 2015
I would like to know how construction period is calculated to determine pre EMI interest for home loan. In my case the house is under construction, I got the loan sanctioned and first dibursement happend in march 2012 and last disbursement in the month of october 2012. I started paying interest from april-2012. If I get the possession in June 2015 , will I be able to get the pre EMI interest paid from april 2012 to march-2015 ?
In the income tax FAQ it states a) Where the property is acquired or constructed with capital borrowed on or after 1.4.1999 and such acquisition or construction is completed within 3 years of the end of the financial year in which the capital was borrowed.
could you please help me with the date considered for borrowed capital (is it first disbursement date or last disbursement date or date of first repayment) or in other words what is the last possible date for the construction to get completed ?
20 July 2025
Great question! Here’s a detailed explanation on how the construction period is calculated for claiming pre-EMI interest deduction on a home loan under Income Tax rules:
Relevant Tax Provision: Under Section 24(b) of the Income Tax Act, you can claim deduction on interest paid on a home loan for a maximum period of 5 years starting from the financial year in which you actually start paying interest. Pre-construction interest (interest paid before possession) can be claimed in 5 equal installments starting from the year in which the construction is completed or possession is received. As per the Income Tax FAQs: The construction period should be completed within 3 years from the end of the financial year in which the capital was borrowed. Key Question: Which date is considered as the date of borrowing for determining the construction period? It is the date of the first disbursement of the home loan that is considered as the date of borrowing. The last possible date for completion is therefore 3 years from the end of the FY in which the first disbursement was made. Applying to Your Case: Parameter Details First disbursement March 2012 Financial Year of first disbursement FY 2011-12 (April 2011 - March 2012) Construction completion deadline 3 years from 31st March 2012 = 31st March 2015 Your possession date June 2015 (after deadline) What does this imply? Since possession is in June 2015, which is after 31st March 2015, you are beyond the 3-year limit for construction period as per the income tax rules. Therefore, pre-construction interest for the period from April 2012 to March 2015 will NOT be allowed to be claimed in 5 equal installments. However, you can still claim interest paid from the year possession is received (i.e., FY 2015-16 onwards) as a normal deduction under Section 24(b). Additional Points: Interest paid during construction period (pre-EMI interest) is to be aggregated and claimed equally over 5 years starting from the year possession is received or construction is complete. If construction exceeds the 3-year limit, pre-construction interest is not eligible for deduction in installments, but interest paid after possession is eligible. Summary Table Interest Type Eligible Deduction? Pre-construction interest (within 3 years) Allowed in 5 equal installments starting possession year Pre-construction interest (exceeding 3 years) Not allowed in installments Interest paid post-possession Allowed fully in the year paid Recommendation: Keep proof of disbursement and possession. Claim interest paid after possession normally.
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