Are you aware that going with an already constructed property can offer you tax benefits hundred times more than going with one undergoing construction? Often people are found preferring under-construction properties over ready to move houses. Analyzing the reason, it has been found that it is the low cost of the under-construction houses that attract the buyers. But, getting driven by such low rates what they miss is realizing the potential risks involved in relation with the income tax and other financial implications. Hence, while going with the low rate houses, what people end up with is incurring huge bucks for income tax.
Benefits Offered by Income Tax Act 24(b)
As of the present scenario, it cannot be overlooked that property prices in the metro cities are going up each day. Without home loan, it is hardly possible for an average man to get a house. But what Income Tax Act Sec. 24 (b) offer is a considerable deduction over the interest paid on the sum borrowed for construction, purchase or accomplishing repairs of an apartment. One can however claim this only after the task is accomplished and there is a document ready for satisfying the same. The interest you paid throughout the construction period is liable to be claimed any time over the span of five years in 5 installments once you take over the possession. What is important to note in this regard is if you sell the property within this 5-year span, you will lose the option of claiming your Pre-EMI interest.
Tax Benefits Over the Interest To Be Paid in Home Loans
While the maximum deductible interest amount is restricted to Rs. 2 lakhs, there prevails a chance of Rs. 30,000 being deducted in case you make delay with the possession of the property over 5 years. Where the risk prevails with under construction properties is the delay with possession. On the contrary, with ready to go houses, such issues can be avoided reliably. Again, if you intend to sell the property within this span of 5 year, you will end up losing this tax benefit on house on a whole. Not just you enjoy deduction over the interest to be paid, section 80 C of Income Tax Act also offer you with a deduction of Rs. 1,50,000 over the principal loan repayment amount obtained from certain specific entities. But this benefit, too, is available after you take over the possession. Also, you have the chances of losing the benefit upon making delays with the possession.
Benefits offered by Income Tax Act sec 54 and 54F- exemption from capital gains(long term)
Now that you have learned tits on tax benefits upon buying property, there is another benefit that you obtain from selling your property. Income Tax Act section 54 and 54F allow you with an exemption from capital gains (long term). This means that if you invest the amount you gained from the sale of your residential house on another undergoing construction within a span of 3 years from the sale date, then you are liable for enjoying the tax benefit offered by the above mentioned sections. But any delay with the possession might lead you to pay some taxes for your capital gains. So, though you enjoy certain benefits going for under construction property, the risk of delay in possession can let go all in vain.