Deduction on account of interest is of two types:
- Interest pertaining to the pre-construction period
- Interest pertaining to the post-construction period.
Post-construction period interest is the interest pertaining to the relevant year (i.e., the year for which income is being computed).
Pre-construction period is the period commencing from the date of borrowing of loan and ends on earlier of the following:
➣ Date of repayment of the loan; or
➣ 31st March immediately prior to the date of completion of the construction/acquisition of the property.
Interest pertaining to the pre-construction period is allowed as deduction in five equal annual instalments, commencing from the year in which the house property is acquired or constructed.
Thus, Pre-construction period interest = Total interest of pre-construction period÷5
Where do I get the pre-construction period interest amount?
The amount of pre-construction period interest is found in the home loan interest certificate.