Income Tax Return Filing AY 2025-26: The Income Tax Department has extended the deadline to file income tax return (ITR) for FY 2024-25 (AY 2025-26) by 45 days to September 15, 2025. This extension for taxpayers, whose accounts are not liable to be audited, will now help assessees collect their documents and do preparations before they file their income tax returns. Salaried individuals, who are under the Old Tax regime, disclose their investments for tax calculation purposes at the beginning of the financial year and submit investment proof towards the end of the financial year. The investment disclosure and proof submission help employers calculate the exact tax liability on employee salaries and deposit TDS (tax deducted at source).
Employees get deduction benefits on certain investments or savings done. But there is one investment that doesn’t help taxpayers avail the deduction benefit immediately in the same year or next year. This is loan repayment for under under-construction house, where tax benefits on interest payment can be availed after 5 years.
So, if you have built a new house by taking a home loan or have invested in a flat under construction, then there is an important tax exemption for you, which many people miss. The interest you pay on the loan till the house is ready is called pre-construction interest. You can also claim income tax exemption on this interest – provided you claim it on time and in the right manner while filing ITR.
What is this pre-construction interest, and how will you get exemption?
Section 24(b) of the Income Tax Act, 1961 (hereinafter referred as the IT Act) allows deduction of interest where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital. Such interest is allowed only with respect to ready-to-move-in properties. In case where interest on home loan is paid with respect to the under-construction properties, the same is termed as pre-construction/ pre-acquisition period interest, explains CA (Dr.) Suresh Surana.
Pre-construction/acquisition period starts from the date of borrowing and ends on the last day of preceding financial year in which the construction is completed i.e. 31st March of the year in which construction is completed or date of repayment of loan (whichever is earlier), he added.
Also read: No extension in ITR filing deadline for these taxpayers – Are you one of them?
How to claim pre-construction home loan interest while filing ITR?
You can claim this interest not all at once but in equal parts every year for 5 years after the construction is completed. For example, if you have paid Rs 1 lakh interest before the house is built, you can show a deduction of Rs 20,000 every year in your ITR for the next five years — this will be included in the annual limit of Rs 2 lakh.
Steps to claim benefits on the interest amount
Kinjal Bhuta, Secretary, Bombay Chartered Accountants’ Society explains steps to claim benefits on the interest amount paid during the 5 years.
Pre-construction interest means interest on borrowed capital for acquisition/construction of a property. Taxpayers need to first bifurcate and find out the interest component from the EMI payments on borrowed capital up to the year of construction. From the interest component, any amount of interest, if it has been claimed as a deduction from income tax previously or current year should be reduced.
The balance amount of interest can be divided by 5 and claimed in the year in which construction is completed and the subsequent 4 years. Maximum deduction on interest on a housing loan for self-occupied house property is limited to Rs 2,00,000 and pre-construction interest is also part of this overall limit.
In a let-out property, there is no such threshold. In ITR, this interest can be claimed under the head ‘Interest on borrowed Capital’ in the Schedule HP.