I took a loan to purchase a property in 2012. Since construction is still on and I am paying the pre-EMIs, I want to know if I am eligible for tax benefits. The bank has informed me that I will be allowed a rebate on after the construction is complete. Will I have to continue paying the pre-EMIs if construction is delayed? Please advise.
- Semant Ahuja Assuming that your home loan is a construction-linked one, and you are paying a pre-EMI or simple interest till such time that you get the possession of the flat, the entire interest, whether in the form of pre-EMI interest or part of EMI payments, can be claimed in five equal installments starting from the year of completion of construction.
If it is a self-occupied property and construction is completed by March 2018, then the overall limit for deduction under section 24B is ₹ 2 lakh, including the interest for the current year. For self-occupied property where construction is not completed by March 2018, the limit will be lower at ₹ 30,000. If the property is let-out, then you can claim the entire interest payable as a deduction without any upper limit.
You will have to continue paying the pre-EMI to avoid becoming a defaulter. The builder may not compensate for the losses due to delay in construction unless specified by him in the agreement. In case of inordinate delay you can approach the consumer forum for redressal. The choice of builder is clearly for you to exercise even if the builder is pre-approved by the bank. Can I take a home loan from a relative? I understand that in such a case only the interest component will be considered for tax exemption. What documents will I require for the purpose?
- Raghav Sharma You can take a home loan from your relative and claim tax deduction benefits for interest payable on the loan. No deduction is available for the principal payment under Section 80 C.
If required, during the assessment proceedings, you will need to provide proof that the loan given by the relative was used for the purpose of acquiring, constructing and renovating the house property. You will also need to obtain a certificate from your relative broadly on the lines that a bank gives for tax deduction purposes if the property is self-occupied. What are the documents needed once the bank has sanctioned the home loan? Do all original documents need to be submitted?
-Manjit Singh All original documents related to the property will have to be given to the bank. You can keep a photocopy for yourself. You need to get an acknowledgment for the original documents submitted to the lender and taken in their custody in the form of a receipt.