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80c deduction

20 December 2014

Dear All,

Please let me know whether a property which is under construction is eligible for deduction under section 80C for principal loan repayment.

I have read in many articles that it is not eligible, but I haven't found anything clearifying such thing in Bare Act...

Please guuide me through this...

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4 Replies

CA SONIYA AGARWAL (self practice) (3005 Points)
Replied 20 December 2014

Principal: Till the house is not constructed and the possession is not taken over, deduction on house loan principal repayment is not allowable. You need to have possession and certificate of ownership to claim tax under section 80C. In simple words it is said that you should be the owner of the house property. After the possession is received, the deduction can be claimed normally up to a maximum of Rs. 1.5 Lakhs under section 80C.

Interest: The interest deduction u/s 24(b) can be claimed after the possession of the house property is taken over. However, the total amount of interest paid on home loan prior to possession of house property as can be claimed as pre-construction interest in 5 equal installments for next 5 years from the financial year in which possession is received. The pre-construction interest is allowed upto a limit of Rs 2 Lakhs including the current year interest payment on home loan. This can be claimed only after the house is ready and possession is taken over. If the house has been let out, the taxpayer can claim the entire interest component as deduction from the rental income without any restriction.

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VAIBHAV SACHDEVA (STUDENT) (75 Points)
Replied 20 December 2014

Mam,

I'll be greatful to you, if you please tell whether is it specified in Bare Section or its' your personal conclusiuon..?

NAVEESH DHAR (ADVOCATE- TAXATION ADVISOR) (427 Points)
Replied 21 December 2014

Till the house is not constructed you can't claimed the deduction of intt on housing loan but whenever the construction will be completed you can claimed the deduction up to 20% of total intt. i.e. intt from begining to till date of construction in addition to this intt for that year is also available for deduction.

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Roshan Thomas (C.E.O ) (356 Points)
Replied 23 December 2014

Yes , you are not eligible for 80 C deduction since

Principal u/s 80C

Payment for the purposes of purchase or construction of a residential house property the income from which is chargeable to tax under the head "Income from house property" towards repayment of the amount borrowed by the assessee . In order to claim deduction the property should be taxable under Income from house property. An asset under construction is not chargeable under this head, therefore till construction is completed principal payment cannot be deducted u/s 80C

Interest - u/s 24

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, shall be deducted under this clause in equal instalments for the said previous year and for each of the four immediately succeeding previous years - Therefore for Interest there is a precondition that construction should be completed for claiming deduction of interest

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