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You generally cannot deduct all interest paid on an under-construction home in the year you pay it. For an eligible loan, interest attributable to the period before the property is acquired or construction is completed is normally accumulated and claimed in five equal instalments, beginning in the financial year of acquisition or construction and continuing for the next four years.
The result depends on the property’s use, the date construction or acquisition is treated as occurring, whether a self-occupied completion deadline is met, your tax regime, and whether you are claiming interest or principal. The limits below are year-sensitive; the ₹1,50,000 section 80C figure is stated for AY 2026–27, while the individual ITR instructions for your assessment year should be checked before filing.
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What you can claim while the property is under construction
There are two separate home-loan claims:
- Interest under section 24(b): qualifying interest for the pre-acquisition or pre-construction period is spread over five equal instalments. Interest relating to the year after the relevant acquisition or construction milestone is considered separately.
- Principal under section 80C: eligible repayment of loan principal may qualify within the section 80C conditions and combined limit. This is a separate deduction from interest.
Paying a builder’s instalment, receiving a provisional interest statement, or making a loan drawdown does not by itself mean that the entire amount can be deducted immediately. The statutory language is tied to acquisition or construction of the property. In a disputed or unusual possession case, the ownership documents, completion facts and loan terms may need professional interpretation.
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Identify the statutory milestone
First establish the financial year in which the house is acquired or construction is completed for section 24(b) purposes. The relevant year is not automatically the year of every builder demand or loan instalment. Keep the agreement, possession or completion evidence, registration documents and lender records that support the date used in your return.
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Calculate the eligible pre-period interest
Ask the lender for an annual interest certificate that separates interest attributable to the period before the relevant acquisition or construction year from interest for the current period. The section 24 explanation requires a certificate in the applicable circumstances. Retain annual loan statements and payment evidence as well.
Divide it into five equal instalments
Divide qualifying pre-construction interest by five. Claim one-fifth in the year the property is acquired or construction is completed, then one-fifth in each of the four immediately succeeding previous years. The statutory wording describes these as equal instalments for the relevant previous year and the four succeeding previous years.
For example, if the eligible pre-period interest is ₹10,00,000, the scheduled instalment is ₹2,00,000 per year for five years. In each year, add that instalment to the qualifying interest for that year, then apply the rules for the property’s use and your tax regime. Do not claim the full ₹10,00,000 in the year construction ends, and do not count the same interest under another provision.
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Interest for the post-acquisition or post-completion period is considered in the year to which it relates. It is not part of the five-year pre-period amount. Your lender certificate should make the split clear; if it does not, request a corrected or more detailed statement before preparing the return.
Self-occupied property: cap and completion deadline
For a self-occupied house, the Income Tax Department’s section 24 explanations describe a maximum section 24(b) deduction of ₹2,00,000 when the specified conditions are satisfied. One important condition is completion of acquisition or construction within five years from the end of the financial year in which the borrowed capital was borrowed. The exact statutory conditions and the assessment year must be checked for your facts.
Where that completion condition is not met, the same explanation describes a ₹30,000 limit for the self-occupied property. This is not a choice between two caps: the lower limit can apply when the qualifying completion requirement is missed or another specified condition is not satisfied.
How to test the five-year deadline
- Record the financial year in which the relevant borrowed capital was borrowed.
- Count five years from the end of that financial year.
- Compare the legally supportable acquisition or construction-completion date with that deadline.
- Keep evidence of the lender drawdown, construction completion, possession and registration dates.
- If construction was delayed, obtain advice on whether the facts satisfy the statutory completion test before using the ₹2,00,000 limit.
A builder’s promised hand-over date is not the same as proof that the statutory condition was met. If only part of the property was usable, or possession and legal completion occurred in different periods, document the facts rather than selecting the more favourable date without support.
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Let-out property: a different computation
Do not apply the self-occupied ₹2,00,000 or ₹30,000 framework mechanically to a let-out house. The Income Tax Department’s return guidance treats actual eligible interest under section 24(b) as part of the let-out-property computation. The five-year instalment treatment for pre-period interest still needs to be reflected correctly, but the final house-property result is calculated under the let-out rules.
The tax regime also matters. The AY 2026–27 help material notes restrictions under the new regime on setting off or carrying forward a loss from house property. Therefore, a large interest figure for a let-out property may not produce the same immediate tax result under the old and new regimes. Calculate the house-property income and the regime-specific loss treatment together instead of looking only at the interest line.
When a property changes use
Keep a dated record if the home is self-occupied for part of a period and let out later, or the reverse. The applicable computation can change with use, and the return should reflect the status relevant to the period and the rules for that assessment year. Obtain advice where more than one property, partial letting, or a change in use is involved.
Principal repayment under section 80C
Qualifying repayment of housing-loan principal is a separate claim from section 24(b) interest. Section 80C can cover repayment categories for an eligible residential property, subject to its statutory conditions. The AY 2026–27 help page places section 80C in the old-regime deductions and states a combined ceiling of ₹1,50,000 for section 80C and the other specified provisions counted within that limit.
The ceiling is shared. Principal repayment does not receive a separate ₹1,50,000 allowance if you are already using the limit for other eligible payments. Add all qualifying section 80C items before deciding how much of the loan principal can be claimed.
Five-year holding rule
The Income Tax Department’s deduction guidance describes a minimum holding period measured from the end of the financial year in which possession of the property is obtained. If you transfer the property before completing that period, earlier section 80C deductions can be reversed or treated as taxable in accordance with the law. Check the exact statutory wording and the transfer year before selling, gifting or otherwise transferring the property.
For an under-construction purchase, do not assume that principal paid before possession automatically creates a usable section 80C deduction in the year of payment. Confirm that the payment category, property status, possession date and assessment-year instructions all support the claim.
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Old and new tax regimes
| Issue | Old regime | New regime |
|---|---|---|
| Section 80C principal | AY 2026–27 help material lists section 80C deductions, subject to the combined ₹1,50,000 limit and statutory conditions. | Do not assume the section 80C claim is available; use the deductions permitted for the applicable year and regime. |
| Self-occupied section 24(b) | Apply the applicable statutory cap and completion condition. | Check the current year’s permitted treatment and any interaction with the regime’s house-property rules. |
| Let-out property loss | Apply the old-regime set-off and carry-forward rules for the year. | AY 2026–27 guidance flags restrictions on set-off or carry-forward of house-property loss; calculate the permitted result rather than assuming the whole loss reduces other income. |
The cited AY 2026–27 return-help page is labelled for Hindu Undivided Families. It is useful for identifying the year’s regime structure and requested fields, but an individual taxpayer should verify the current individual ITR instructions before filing. Rules can change between assessment years.
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Older additional-interest provisions have narrow sanction-date windows:
- Section 80EE: the Income Tax Department describes eligibility for qualifying loans sanctioned in financial year 2016–17.
- Section 80EEA: the described window covers qualifying loans sanctioned from 1 April 2019 to 31 March 2022, subject to the provision’s other conditions.
These provisions should not be presented as generally available for a new loan sanctioned today. Verify the sanction date, property value, first-home conditions and other statutory requirements before considering either provision. If the loan falls outside the specified window, do not claim the additional deduction merely because the property is affordable or under construction.
Documents to collect before preparing the return
- Annual interest certificate from the lender, with the pre-period and current-period interest identified where applicable.
- Loan account number, lender name and address, sanction date, sanctioned amount and year-end outstanding balance.
- Annual loan statements showing interest and principal paid or accrued.
- Sale agreement, allotment documents, registration papers and possession or completion evidence.
- Builder demand letters and payment receipts, used as supporting records rather than as automatic proof of the statutory acquisition or construction year.
- Proof of rent and municipal-tax details if the property is let out and those figures are relevant to the house-property computation.
- Records of other section 80C payments so the combined limit is not exceeded.
- Evidence of the tax regime selected and the assessment-year return instructions used.
The return-help material identifies lender details, loan account number, sanction date, amount, year-end balance and interest figures as information used in the house-property reporting process. Keep the certificate even if the return does not require an upload; the department can ask for evidence later.
Step-by-step claim process
- Fix the assessment year. Write down the financial year in which the income is earned and the assessment year for which the return is filed. Do not carry the AY 2026–27 figures into another year without checking the current instructions.
- Establish the property milestone. Determine the supportable year of acquisition or construction completion. Record why that date was selected and retain the underlying documents.
- Request the lender certificate. Ask for a certificate that states total interest, current-period interest and qualifying pre-period interest. Reconcile it to the annual loan statement.
- Compute the five-year instalment. Divide eligible pre-period interest by five and identify which instalment year you are filing. Add only the instalment due for that year.
- Add current-period interest. Include eligible interest for the filing year, avoiding duplication with the pre-period schedule.
- Classify use. Mark the property as self-occupied or let out according to the facts and apply the corresponding section 24(b) computation.
- Test the self-occupied deadline. If claiming the ₹2,00,000 ceiling, verify the five-year completion condition and retain evidence. If it is not met, assess the ₹30,000 limit described by the department.
- Compute let-out income separately when applicable. Apply the actual-interest treatment and the year’s rules for house-property loss, especially under the new regime.
- Calculate principal independently. Identify only section 80C-eligible principal and combine it with your other section 80C claims. For AY 2026–27, check the old-regime ₹1,50,000 combined ceiling.
- Check legacy provisions. Consider sections 80EE or 80EEA only if the sanction date and every other condition fall within their specified windows.
- Enter the figures using the individual ITR instructions. The AY 2026–27 material cited for field-level details is labelled HUF, so verify the corresponding individual return schedule and labels before submission.
- Reconcile and retain. Make sure the return totals agree with the lender certificate, property-use classification and regime selected. Save the certificate, calculations and supporting documents.
Worked examples
Self-occupied home completed within the deadline
Assume qualifying pre-period interest is ₹6,00,000, so the five-year instalment is ₹1,20,000. Interest for the first post-completion year is ₹70,000. The combined section 24(b) amount considered before the cap is ₹1,90,000. If the property is self-occupied and the statutory completion condition is satisfied, this amount is below the department’s described ₹2,00,000 ceiling. Principal repayment must still be tested separately under section 80C.
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Use the same ₹1,90,000 calculated amount, but assume the five-year completion condition is not met. The department’s explanation describes a ₹30,000 ceiling in the specified late-completion circumstance. The excess is not converted into a section 80C claim; interest and principal remain separate categories.
Let-out home under the new regime
Assume the five-year instalment and current-year interest produce a substantial amount for a let-out property. The property-income computation uses the applicable actual-interest treatment, but the new regime’s restrictions on house-property loss set-off or carry-forward can limit how much of the resulting loss affects other income. The tax saving cannot be determined from the interest certificate alone.
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Common mistakes and how to correct them
Claiming all construction-period interest at once
Problem: the full pre-period total is entered in the year of possession or completion.
Correction: divide eligible pre-period interest into five equal instalments and claim only the instalment for the current year, plus eligible current-period interest.
Using the ₹2,00,000 cap without checking completion
Problem: the taxpayer assumes every self-occupied loan qualifies for the higher ceiling.
Correction: compare the documented completion or acquisition date with five years from the end of the financial year in which capital was borrowed. If the condition is not met, examine the lower limit described by section 24 guidance.
Mixing principal and interest
Problem: principal is included in the section 24(b) figure, or interest is counted against the section 80C limit.
Correction: maintain two schedules: one for section 24(b) interest and one for section 80C-eligible principal and other payments.
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Ignoring the combined 80C ceiling
Problem: the full principal amount is claimed even though other section 80C payments already use the limit.
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Correction: total every eligible section 80C item first. For AY 2026–27, the cited guidance states a combined ₹1,50,000 ceiling under the old regime.
Treating a provisional certificate as conclusive
Problem: a provisional interest certificate is used without checking whether its dates and split match the statutory milestone.
Correction: reconcile the provisional figure with the final annual certificate and the acquisition or completion evidence. If the lender cannot separate the periods, request clarification and retain both statements.
Assuming 80EE or 80EEA applies to every first-home loan
Problem: an additional deduction is claimed solely because the buyer is purchasing a first home.
Correction: verify the narrow sanction-date window and every other condition. A current loan outside those windows does not qualify merely because the property is affordable or under construction.
When professional review is sensible
Consider a qualified Indian tax professional when possession, registration and completion occur in different years; construction is delayed beyond the statutory period; the property is partly let out; ownership is shared; a loan is refinanced; the lender certificate is incomplete; or you are changing tax regimes. A professional can map the documents to the assessment-year law, but you should still retain the original lender and property records.
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