Home Loan Tax Benefits For Delayed Property Possession

1. For self-occupied properties, no home loan tax benefits. 

1. Deductions under Sections 80C, 24(b), 80EE, and 80EEA are not allowed. 

Exception: Under Section 24(b), interest deduction is allowed only for let-out properties 

Key points under Section 115BAC are: 

1. Loss from house property cannot be set off against income from other heads. 

1. Unadjusted losses cannot be carried forward. 

1. For self-occupied properties, no interest deduction is allowed. 

Home Loan Tax Benefits in India

Key tax deductions available on housing loans are mentioned below: 

1. Section 24(b): Interest deduction applicable for up to Rs.2 lakh per year. It is applicable if construction or possession is completed within five years from the end of the financial year in which the loan was taken. 

1. Section 80C: Covers principal repayment on home loans and offers deduction up to Rs.1.5 lakh per annum. 

1. Section 80EE: As an additional benefit for first-time buyers, an extra deduction up to Rs.50,000 on interest will be offered subject to eligibility conditions. 

Tax Impact of Delayed Property Possession

Delay in property possession affect tax benefits and those are mentioned below: 

1. Reduced Interest Deduction: If possession is delayed beyond five years, the deductions reduce to Rs.30,000 from Rs.2 lakh per year under section 24(b). 

1. Legal Relief vs Tax Relief: Buyers can seek compensation under RERA (Real Estate (Regulation and Development) Act of 2016), 2016. 

Ways to Manage Tax Loss Due to Delays

Practical strategies to reduce financial impact are mentioned below: 

1. Always obtain a possession certificate from the builder 

1. Maintain records of all pre-construction interest paid 

1. Claim tax deductions on pre-construction interest after possession 

1. In case of delays, seek timely clarification from the builder 

1. For grievance redressal and resolution, approach RERA, if necessary,  

1. Plan assuming possible possession delays and maintaining liquidity. 

1. Redirect savings to other tax-saving options, such as PPF, ELSS, NSC, etc. 

1. Consult real estate legal experts in case of delays. 

Preventive Measures for Future Homebuyers

Steps to minimize delay-related risks are given below: 

1. Check developer track record by reviewing past project delivery timelines 

1. Assess the credibility and financial stability of the developer. 

1. Verify project and developer registration under RERA as it provides protection through timely possession norms and formal grievance redressal mechanisms. 

Documents Required to Claim Home Loan Interest Before Possession

The documents required to claim interest on home loan before possession 

Purpose of Documents are listed below: 

1. To establish property ownership, loan repayment, and date of possession. 

1. Submission to the Income Tax Department. 

Key Documents Required are given below: 

1. Possession Letter or Possession Certificate issued by the builder or housing authority 

1. Loan Statement from Lender 

1. Interest certificate issued by the lender 

1. Loan agreement 

1. Sale agreement 

1. No Objection Certificate (NOC), if required 

Home Loan Interest Deduction Section 24(b) for ay 2023-24

To understand the changes, we need to understand what constituted Section 24(b) first. Before the 2016 Budget, Section 24(b) of the Income Tax Act allowed homeowners of any self-occupied property to get home loan interest deduction worth Rs.2 lakh for the interest paid on the loan taken to purchase a property, provided the developer hands over the property to the homeowner within 3 years of procuring the loan. If the property is taken in on lease, then the limit on deductions is removed.

However, if the developer failed to hand over the possession of the property to the owner within the stipulated 3 years of getting the loan, then the deduction limit came down to Rs.30,000.

With the new changes introduced in Budget 2016, the period for which possession can be delayed has been extended from the earlier 3 years to 5 years. Homeowners with loans can now enjoy 2 more years of tax benefits in case of any delay in property possession. The amount of benefit that can be availed is still capped at Rs.2 lakh. This amendment will apply to existing and new borrowers of home loans alike.

Can I Claim Tax Benefits under Section 80EEA before Possession?

Yes, you can claim tax benefits before possession as mentioned below: 

Section 80EEA: 

1. Maximum deduction allowed: Rs.1.5 lakh 

1. Applicable only on home loans from banks or financial institutions 

Section 24(b): 

1. Maximum interest deduction: Rs.2 lakh 

1. Deduction allowed even if funds are borrowed from friends or family 

1. Generally linked to possession of the property 

Note: To claim home loan tax benefits, a possession certificate is mandatory. 

Claiming Pre-Construction Interest as Per Section 24(b)

The details about claiming pre-construction interest as per Section 24(b) are mentioned below: 

Pre-Construction Interest 

1. If the house is under construction, interest will be paid. 

1. During the construction period, no tax deduction is allowed.  

Availability of Tax Benefit 

1. Only on completion of construction, home loan interest deduction can be claimed. 

1. EMIs usually start after possession. 

Pre-EMI Interest and Tax Benefit 

1. Interest paid on disbursed loan amount during construction is called pre-EMI interest. 

1. After construction completion, this interest can be claimed as a tax deduction in five equal instalments.