What is pre-construction period interest?

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.