When can you claim tax benefits on home loan for under-construction property? Tax expert explains

Home loan tax benefits for an under-construction property are not automatically available from the first EMI. Principal repayment, pre-construction interest and post-completion interest follow different rules, while the property’s completion date and chosen tax regime can affect eligibility.

If you have bought an under-construction home and have already started paying EMIs, do not assume you can immediately claim all available home loan tax benefits. The tax treatment varies depending on whether the deduction relates to principal payments or interest payments.

While loan repayments may begin before possession of the property, eligibility for tax deductions is subject to specific conditions under the Income-tax Act. Understanding these rules can help taxpayers avoid incorrect claims.

Principal repayment: EMI start date is not only factor

Nishant Shanker, Tax Controversy & Dispute Resolution, Navraj Global Advisors, said, “Buying an under-construction home means commencing EMIs before getting the home possession. Under the Income-tax Act, 2025, the answer depends on whether one is claiming the benefit for principal repayment or interest and whether the applicable conditions have been satisfied. For principal repayment, an important point is that merely starting repayment of the home loan does not automatically make every principal component immediately deductible. The deduction for eligible housing-loan principal repayment falls within the Rs. 1.5 lakh overall limit under Section 123 read with Schedule XV.”