Pre-EMI Interest
The bank may disburse a partial amount to you / builder depending on the stage of construction of the house. In this case, you do not pay an EMI, but instead, pay a pre-EMI interest.
You can not claim any income tax benefit on this pre-EMI interest in the year you pay it to the bank.
Pre-EMI interest can be claimed in 5 equal instalments after the construction of the house ends. That is, it can be claimed in 5 equal instalments starting from the FY in which the construction of the house ends and you get its possession.
This pre-EMI interest should be claimed along with the interest component of the EMI under section 24. The overall limit remains Rs.1.5 Lakhs even in this case.
Example
Let's say you pay Rs. 20,000, Rs. 30,000 and Rs. 30,000 as pre-EMI interests in years 2003-04, 04-05 and 05-06 respectively.
Now, say you get possession in 2006-07. Then, you can claim Rs.16,000 (A fifth - or 20% - of Rs. 80,000, which is the total pre-EMI interest paid by you) per year from 2006-07 to 2010-11.