FAQ on House Property – Vol.VI

FAQ on House PropertySome more FAQs relating to Pre-Construction interest payment on housing loan are discussed here.

1)      What is Pre-Construction Period?

Ans: Pre construction period means the period commencing from the date of borrowing of loan & ending on the date of repayment of loan or march 31st of the year in which the property was constructed or renovated or repairs and renewals taken up.

For instance, Suppose loan is taken on Jan 2008 and house is completed on 31.01.2010, in that case pre -construction Interest is taken from Jan 2008 to March 2009.

Therefore,  even if House is completed on 31.03.2010 then also the pre construction Interest is considered From Jan 2008 to March 2009.

2)      Suppose construction of my house property is completed within the same year in which the loan has been taken. Any pre-construction interest will be there or not?

Ans: As per sec 24(b), there will be no preconstruction period because house property is completed within the same year in which the loan is taken.

However, interest for the current year shall be allowed in normal manner.

3)      How should I calculate Pre-Construction interest?

Ans: Taking up the question with an example-

Suppose:  The assessee took a loan of Rs. 3, 00,000/- in April, 1999 from a Bank for construction of a house on a piece of land which he owns at Meerut. The loan carried interest @ 15% p.a. The construction is completed in April 2001 and the house is given on rent from May 2001.

Meanwhile he has already incurred liability of interest of Rs. 90,000/- for F.Y. 1999-2000 and 2000-01. Because of the above provision, the assessee can claim a deduction in respect of this interest of Rs. 90,000/- (Over and above the yearly interest) in five equal installments of Rs. 18,000/- each starting from the assessment year 2002-03.

Therefore, in this way you should calculate your Pre-Construction Interest.

4)      Payment Mode- Municipal Taxes Vs. Interest On Loan?

Ans:  Payment mode for the following should be-

  1. Municipal taxes- Payment Basis
  2. Interest On Loan- Accrual Basis

Read Rest Of The FAQs here:

FAQ on House Property – Vol.I

FAQ on House Property – Vol.II

FAQ on House Property – Vol.III

FAQ on House Property – Vol.IV

FAQ on House Property – Vol.V

FAQ on House Property – Vol.VI

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