Updated on: Apr 1st, 2024
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10 min read
House property income allows some deductions from the total taxable income like standard deduction, the deduction for municipal taxes paid, deduction on home loan interest paid, and ‘Pre-construction interest’ paid. Such deductions allow a taxpayer to reduce the tax outflow from their taxable income.
Let us learn more about ‘pre-construction interest’ under section 24(b) and how can we claim it.
Deduction under section 24(b) for pre-construction interest cannot be claimed as a deduction if you are opting for a new tax regime in the case of self-occupied property.
Pre-construction interest is the interest that an assessee pays while the residential house is under construction.
Deduction on home loan interest cannot be claimed when the house is under construction. This pre-construction interest can be claimed only after the construction is finished.
In short:
Particulars | FY 2021-22 | FY 2022-23 | FY 2023-24 |
Principal repayment | 1,80,000 | 2,40,000 | 1,68,000 |
Interest repayment | 90,000 | 1,20,000 | 72,000 |
Total | 2,70,000 | 3,60,000 | 2,40,000 |
Let’s start with his EMI payments for FY 2023-24:
The total interest on a home loan is Rs 72,000 for FY 2023-24. Since the property is rented out, he can claim the entire interest as a deduction.
Also, Prakash can claim a deduction for principal repayment of Rs 1,50,000 (Rs 1,68,000 or Rs 1,50,000, whichever is less) under Section 80C from FY 2023-24.
Now let’s look at the interest paid when the house was under construction:
So Prakash can claim Rs.72,000 (interest of FY 2023-24) + Rs.42,000 = Rs.1,14,000 as a deduction towards the interest from the home loan in FY 2023-24.
All said and done, one needs to bear in mind that :
You can claim the Interest on the housing loan or Pre-construction interest on the housing loan in Schedule HP of your ITR form (ITR 1,2,3,4) under Interest payable on borrowed capital
Click here to read more about home loan deductions
How to calculate income from house property
House property income deductions like standard deduction, municipal taxes, home loan interest, and pre-construction interest can minimize taxable income. Pre-construction interest applies to interest paid while a property is under construction. Taxpayers can claim it after construction. Thresholds apply for deductions on self-occupied vs. let-out properties, subject to limits. Claim pre-construction interest in ITR Form’s Schedule HP.