Archive · 6 Oct 2026
Under-Construction Home Loans: When Tax Deductions Become Available
If you buy a home that is still being built, you might start paying loan instalments before you can move in.
But paying an instalment does not mean you can claim every tax benefit right away.
Rules for the part of the payment that repays the loan are different from rules for interest.
Principal repayment deductions have conditions related to acquiring or completing the home.
Interest from before that point can generally be claimed in five equal parts, beginning in the year the home is acquired or completed.
Later interest follows different rules.
Whether the home is self-occupied or rented can also matter.
The tax regime you choose affects which deductions are available.
Keep records and check when each payment qualifies before claiming it.
Starting EMIs on an under-construction home does not automatically make every home-loan tax deduction available.
Eligible principal repayment falls within the Rs. 1.5 lakh overall limit under Section 123 read with Schedule XV, subject to acquisition or completion conditions.
Pre-construction interest can generally be claimed in five equal instalments starting in the year the property is acquired or construction is completed.
Interest after the relevant acquisition or completion period is treated under normal house-property provisions; the deduction may depend on whether the property is self-occupied or let out.
The applicable tax regime affects which deductions can be claimed, so taxpayers should separately track principal and different periods of interest.
- Who
- Homebuyers with loans for under-construction properties; tax expert Nishant Shanker explains the rules.
- What
- The timing and conditions for claiming tax deductions on home-loan principal and interest are explained.
- When
- Pre-construction interest can generally be claimed in five equal instalments beginning in the year of acquisition or completion.
- Where
- Under the Income-tax Act, 2025.
- Why
- Eligibility depends on the type of payment, acquisition or completion status, property use, and applicable tax regime.
Potential deduction
Eligibility limits
Claiming benefits while the home is under construction
Potential deduction
Eligible principal repayment and pre-construction interest may qualify for tax deductions under the stated rules.
Eligibility limits
The first EMI does not make all deductions immediately available; acquisition or completion conditions and the applicable tax regime must be considered.
- Principal repayment limit
- Eligible principal repayment is within the Rs. 1.5 lakh overall limit under Section 123 read with Schedule XV.
- Principal deduction condition
- Acquisition or completion requirements should be considered; starting EMIs alone does not establish eligibility.
- Pre-construction interest
- Generally claimable in five equal instalments.
- Start of interest instalments
- The year the property is acquired or construction is completed.
- Post-completion interest
- Handled under normal house-property provisions.
- Other factors
- Property use and the chosen tax regime can affect available deductions.