Interest on housing loan

The pre emi interest is to be taken upto the previous year  for which the owner of the property takes the possession of the property.

So in your case as the construction  of the property is completed  in Dec11, so the interest paid upto Mar11 will be taken as pre-emi interest & deduction will be allowed in 5 equal instalments alongwith the interest paid from F.Y. 2011-12 & onwards. The total deduction of the interest wud be restricted to 1.5l if the property is self-occupied & actual interest paid if the property is let-out.

Please go by the section reference given in the I-T Act as it is considered by law.  Do not rely on the publication given even if it is posted on the I-T website.

Viswanath ji,

Pre-construction period means the period commencing on the date of borrowing and ending March 31 immediately prior to the date of completion of construction / date of acquisition or repayment of loan, whichever earlier.

Therefore, the pre-construction period will be June-10 to March-11 (31^st March prior to the date of completion) as construction has been constructed in Dec-11. The pre-construction period interest can be claimed in 5 equal installments from AY 12-13.

The remaining interest (from Apr-11) also can be claimed in full along with 1/5^th of pre-construction period interest u/s 24(b).

Thanks for the response. I would like to get clarified particularly with reference to the definition given in Sec.3 of IT Act, for the term 'previous year' (sec.2 - general definition refers sec.3 for specific definition of 'previous year'), where in it has been stated that "for the purposes of this Act "PY" means the "FY" immediately preceding the 'AY' - Provided that in the case of a business...... or a source of income newly coming into existence in the said 'FY', the 'PY' shall be the period beginning with the date ....on which the source of income newly comes into existence and ending with the said 'FY.

In the instant case, the house property income (even if it is negative income) comes into existence in the FY 2011-12 and hence as per Sec.3, the "Previous Year" shall be from Dec.2011 to March 2012. If it is so, the interest paid upto the 'previous year' i.e, upto Nov.2011, is to be deducted over a period of 5 years.

May kindly responsd in the light of the above.

Thanks for the response. I would like to get clarified particularly with reference to the definition given in Sec.3 of IT Act, for the term 'previous year' (sec.2 - general definition refers sec.3 for specific definition of 'previous year'), where in it has been stated that "for the purposes of this Act "PY" means the "FY" immediately preceding the 'AY' - Provided that in the case of a business...... or a source of income newly coming into existence in the said 'FY', the 'PY' shall be the period beginning with the date ....on which the source of income newly comes into existence and ending with the said 'FY.

In the instant case, the house property income (even if it is negative income) comes into existence in the FY 2011-12 and hence as per Sec.3, the "Previous Year" shall be from Dec.2011 to March 2012. If it is so, the interest paid upto the 'previous year' i.e, upto Nov.2011, is to be deducted over a period of 5 years.

May kindly responsd in the light of the above.

As per the I-T act, the previous year should be the period of 12 months.  However in case of business which is set-up in the middle of the year, say in the month of Dec then the previous year shall be only of 4 months wihc ends on 31st march of the that year.  However as the A.Y. starts from the day after the end of the P.Y. hence it is necessarily a year of 12 months.

Now i your case in case of interest on house property,  the previous year shall be the year whihc ends on 31st march immediately preceeding to the year in whihc the constructino is completed, whihc shall be deducted in 5 equal installemnts paid upto 31st march of the prior year.