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Do Tax Benefits Apply in Case of Possession Delayed by 3 Years?

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Do Tax Benefits Apply in Case of Possession Delayed by 3 Years?

Last updated: January 12 2017
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  • Do Tax Benefits Apply in Case of Possession Delayed by 3 Years?

    One of the key benefits for a home-loan buyer is the tax benefit he / she will get after the possession of the dream home (i.e Rs. 1.5 lakh interest paid become tax - free every year).

    But there is a rider to this condition.

    Possession of the property should be within 3 years of disbursement of the full loan. If it goes beyond 3 years, the 1.5 lakh benefit will reduce to Rs. 30000/- only. That means, for 30% tax bracket, the tax benefit will reduce from Rs 45000/- to just Rs 9000/- per annum.

    So, this is an alarming bell for most of the down-payment end use buyers who are not going to get possession within 3 years of their loan disbursement. Most of the Noida projects will have this delay.

    Is my understanding about this clause correct.
    Last edited December 27 2012, 02:54 PM.
  • #2

    #2

    Re : Do Tax Benefits Apply in Case of Possession Delayed by 3 Years?

    Where did you read this? Please post the link/doc.

    BTW, for several projects, bank financed DP plan only after construction reached advanced stage.

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    • #3

      #3

      Re : Do Tax Benefits Apply in Case of Possession Delayed by 3 Years?

      Usually your full loan will not be disbursed before possession.

      Sent from my Lumia 800 using Board Express

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      • #4

        #4

        Re : Do Tax Benefits Apply in Case of Possession Delayed by 3 Years?

        Not my understanding. Please can you provide a link or a document stating this

        Sent from my GT-I9300 using Tapatalk 2

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        • #5

          #5

          Re : Do Tax Benefits Apply in Case of Possession Delayed by 3 Years?

          Bro. This is a disaster for end users.
          If you dont construct within 3 years from the end of the Financial Year in which loan is taken, then for self occupied houses, Maximum deduction including preconsttuction period and Current year is 30 K..
          Please note 30K is limited including Current year interest.

          Will give an illustration once i reach office.

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          • #6

            #6

            Re : Do Tax Benefits Apply in Case of Possession Delayed by 3 Years?

            Please see the excerpt from the saving declaration documents our company is asking for. I am checking for the related IT Act:

            24Loss on Self-Occupied house property (Housing loan interest)Provisional certificate pertaining to current financial year (Apr ’12 – Mar ’13) with breakup of interest and principle from the Housing Finance Company / Bank.Capped to a maximum of Rs.150000/- only i.e. Total amount allowed for a property is Rs.150000/-.
            If Self-occupied benefit and HRA is claimed for the same period, in the same city, then HRA benefit is disallowed for the overlapping period
            In case of Joint loan, declaration specifying the % of benefit claimed by the individual
            Loan taken before 01/04/1999, interest benefit restricted to Rs.30000/- . Possession Letter from Builder or through self declaration from the employee is mandatory as per IT circular no 8/2012, dated 5th October 2012
            If property is not occupied within 3 years of loan sanction date, benefit is restricted to Rs.30000/
            Interest benefit cannot be claimed, unless the property is in possession on or before 31-Mar-2013.

            Pre-EMI interest (EMI paid before occupation of the house) is deductible in 5 equal installments starting from the year when the construction is completed or property is acquired.Only one self occupied property is considered for tax benefit on interest paid. If multiple properties, claim only one under self-occupied and the rest under let-out
            Last edited December 28 2012, 10:04 AM.

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            • #7

              #7

              Re : Do Tax Benefits Apply in Case of Possession Delayed by 3 Years?

              Originally posted by arpitk1008 View Post
              Please see the excerpt from the saving declaration documents our company is asking for. I am checking for the related IT Act:

              24Loss on Self-Occupied house property (Housing loan interest)Provisional certificate pertaining to current financial year (Apr ’12 – Mar ’13) with breakup of interest and principle from the Housing Finance Company / Bank.Capped to a maximum of Rs.150000/- only i.e. Total amount allowed for a property is Rs.150000/-.If Self-occupied benefit and HRA is claimed for the same period, in the same city, then HRA benefit is disallowed for the overlapping periodIn case of Joint loan, declaration specifying the % of benefit claimed by the individualLoan taken before 01/04/1999, interest restricted to Rs.30000/-Possession Letter from Builder or through self declaration from the employee is mandatory as per IT circular no 8/2012, dated 5th October 2012Housing Loan interest taken for renovation/repairs restricted to Rs.30000/-Bank statement showing only EMI deduction will be disallowed.If property is not occupied within 3 years of loan sanction date, benefit is restricted to Rs.30000/-Interest benefit cannot be claimed, unless the property is in possession on or before 31-Mar-2013.Pre-EMI interest (EMI paid before occupation of the house) is deductible in 5 equal installments starting from the year when the construction is completed or property is acquired.Only one self occupied property is considered for tax benefit on interest paid. If multiple properties, claim only one under self-occupied and the rest under let-out


              Why r u scaring Buyers ??
              How will My flats sell if buyers get to know truths..

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              • #8

                #8

                Re : Do Tax Benefits Apply in Case of Possession Delayed by 3 Years?

                Originally posted by arpitk1008 View Post
                If property is not occupied within 3 years of loan sanction date, benefit is restricted to Rs.30000
                Interest benefit cannot be claimed, unless the property is in possession on or before 31-Mar-2013.
                contradicts with your original post, which says

                Possession of the property should be within 3 years of disbursement of the full loan
                In case of loan sanction, even CLP buyers are not spared!

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                • #9

                  #9

                  Re : Do Tax Benefits Apply in Case of Possession Delayed by 3 Years?

                  I have requested our finance guys to make it more clear. Meanwhile, if anybody expert on taxation rules, request if you can put some light on this.

                  I checked with some of my colleagues & they say, possession should be within 3 years of final disbursement of the loan. For CLP customers, the last installment paid from bank is considered as the date of disbursement of the loan. For DP customers, its the date when down payment is released to the builder by the bank.

                  Expert's comments please.

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                  • #10

                    #10

                    Re : Do Tax Benefits Apply in Case of Possession Delayed by 3 Years?

                    But even in case of DP, last 5% is paid on possession only!

                    If what you wrote is true, then it is a problem for end users. Investors will not be affected.

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