Decoding Tax Savings: A Closer Look at Under-Construction Property Investments

Investing in under-construction property can provide unique tax benefits, making it an attractive option for homebuyers and investors alike. While the process requires careful planning, understanding the tax-saving opportunities can significantly reduce financial burdens. With the right knowledge, under-construction property investments can offer both long-term growth and short-term savings.

Here’s a concise breakdown of the key tax benefits, eligibility criteria, and considerations to keep in mind:

Key Tax Benefits for Under-Construction Properties

Section 24(b) – Interest on Home Loan
- Deduction Limit: Up to ₹2 Lakh per year after possession.
- Pre-Construction Interest: Deductible in 5 equal installments starting the year construction completes.
- Conditions: Construction must finish within 5 years from the end of the financial year when the loan was taken. If delayed, the deduction reduces to ₹30,000/year.
Section 80C – Principal Repayment
- Deduction Limit: Up to ₹1.5 Lakh/year for the principal amount after possession.
- Stamp Duty and Registration: Deductible even during the pre-construction period.
- Conditions: If sold within 5 years of possession, these benefits will be reversed.
Section 80EEA – Additional Interest Deduction
- Deduction Limit: Up to ₹1.5 Lakh/year.
- Eligibility:
  - First-time home buyer.
  - Loan sanctioned between 1st April 2019 and 31st March 2022.
  - Property stamp duty value ≤ ₹45 Lakh.
  - Carpet area ≤ 645 sq. ft. (metro) or 968 sq. ft. (non-metro).

4. Pre-Construction Period Deductions

Deductible under Section 24(b) in 5 installments post-completion, provided the construction adheres to timelines and loan purposes.

Investment Tips and Risks

Plan for Delays
- Choose developers with a strong track record.
- Ensure construction completes within 5 years to maximize tax benefits.
Loan Considerations
- Regular EMI payments before possession focus on interest; principal repayment benefits (under 80C) start post-possession.
Selling Restrictions
- Selling within 5 years’ reverses tax benefits under Section 80C.
- For properties purchased with the sale of an old house, ensure timely completion (3 years from the sale date).
GST Rates
- Standard: 5% for under-construction properties.
- Affordable Housing (< ₹45 Lakh): 1%.

FAQs Simplified

Max Tax Benefits?
₹2 Lakh (Section 24), ₹1.5 Lakh (Section 80C), and ₹1.5 Lakh (Section 80EEA if eligible).
Delays in Construction?
Minor delays won’t impact benefits, but completion within 5 years is crucial for maximum deductions.
Self-Occupied vs. Rented
Self-occupied: Max ₹2 Lakh deduction (interest).
Rented: Full interest deductible without limit.

Strategically leveraging these benefits while considering risks such as project delays can make under-construction property an attractive investment. Explore reputable developers for well-planned communities and secure future returns!

Disclaimer

DISCLAIMER

All project information and details displayed on the site, including but not limited to the information and details contained in project related materials that you may download are for information purposes only and do not constitute an offer under any law for the time being in force. The Company shall not be liable to you for any decisions you may take as a result of or on the basis of such information and encourages you to contact the Company directly for up-to-date and accurate information.

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Mr. Rakesh Bhura

Director

Mr Rakesh Bhura holds the MBA degree from the Leeds University,UK. The youngest and the most dynamic among the directors he plays an important role in planning and execution at the site. He is actively involved in site execution,purchases & manpower management. He has his own innovative approach towards the projects and all his endeavours have been successful. Mr Bhura is the young promising face of Utkal Builders.

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Director

Anchors the sourcing function at Utkal. He is credited with deriving the best value from our sourcing partners – contractors and vendors of material inputs. Recently, he has taken additional responsibility of the marketing function. However, complicated and large his tasks, his energy and positive attitude make them all possible! And somewhere in the middle, he also finds time to pursue sports and instruct his disciples on yoga.

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Mr. Sharad Baid is the Managing Director of Utkal Builders & has earned his Masters in Business administration from Bond University, Australia. He specialises in Finance and Information systems.By spearheading new initiatives in Utkal Builders, Mr. Baid has enhanced the framework for strategic planning and project development. In addition, he plays a crucial role in the corporate branding & project marketing of the Group.

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The visionary with a mission and an opportunity – guru, his insights are the engines of innovation and new businesses. His passion for opportunities is only matched with his perseverance to bring them to life. He has been the torch-bearer and the agent of evolution at the group. He has also served as the president of CREDAI, Odisha (2010-11).