I bought an under-construction house in September 2023 and have made several payments toward it. Here is a breakdown of the expenses I have incurred so far:
In 2023, I made an initial payment of ₹5.5 lakh as a token amount to the builder. I also paid ₹4 lakh to the government as stamp duty and other charges. I would like to understand whether any of these payments can be carried forward for tax exemption in financial year 2024-25, and if so, under which sections.
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Moving to 2024, I paid a ₹1 lakh instalment to the builder. I also repaid ₹9 lakh of my home loan principal and ₹2 lakh in interest. I would like to know if I can claim tax benefits for all three payments, and under which sections.
Lastly, I want to know if any payments made in 2024 can be carried forward to future years for tax exemption. Understanding the relevant tax provisions will help me optimise my taxes while managing my home loan and property-related expenses efficiently.
– Name withheld on request
For 2023: The ₹5.5 lakh token amount you paid to the builder is part of the cost of acquisition of the house and can be deducted from the sale value whenever you sell it.
Stamp duty of ₹4 lakh could have been claimed as a deduction under Section 80C of the Income Tax Act, but the deadline to file the return has passed. The amount can be considered as capitalised to the cost of property and can be deducted from the sale value when the property is sold.
Theses are payments/expenses towards the purchase and cannot be carried forward or claimed as an exemption as there are no such provisions in the law. However these are part of your costs and can be deducted from the sale value when calculating capital gains for the year in which you sell the property.
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For 2024: The ₹1 lakh instalment is part of the cost of acquisition and can be deducted from the sale value whenever you sell the house.
The ₹9 lakh principal repayment can be claimed as a deduction under Section 80C, subject to a maximum of ₹1.5 lakh. However, this deduction is not available if you choose the new income tax regime.
Since the property is still under construction, you cannot claim any interest payments in your return. However, once the construction is completed, you can claim the total interest paid during the pre-construction period in five equal instalments starting from the year in which the construction was completed. The upper limit on claiming such interest ₹2 lakh a year for a self-occupied residential property. However, this is not available if you choose the new tax regime.
Kinjal Bhuta is a chartered accountant and secretary of the Bombay Chartered Accountants’ Society (BCAS).
