ITR filing FY 2024-25: How to claim housing loan pre-construction interest

ITR filing FY 2024-25: How to claim housing loan pre-construction interest
Updated on
4 min read

Your dream home deserves smart financial planning from the very beginning. Choose an experienced partner like Bajaj Finserv that understands both the lending and tax implications of your decisions. Get expert guidance and competitive home loan rates with Bajaj Finserv.

Three out of five homeowners building their dream houses overlook a crucial tax deduction. They pay thousands in interest during construction yet fail to claim pre-construction interest benefits. This oversight costs them significant tax savings over five years.

The extended ITR deadline for FY 2025-25 gives you extra time to get this right. Learn how you can secure every rupee you deserve while choosing the best home loan interest rate for your future. Your financial planning starts with understanding these deductions properly.

Understanding pre-construction interest

Pre-construction interest refers to the interest you pay on borrowed funds before your property construction is completed. Section 24(b) of the Income Tax Act allows deductions on this interest component. However, you cannot claim these deductions immediately after paying the interest.

The law requires you to wait until construction finishes before claiming any benefits. Many taxpayers assume they can claim deductions during the construction period itself. This assumption leads to incorrect ITR filing and missed opportunities.

Your home loan documentation will clearly separate principal and interest components during construction. Understanding this distinction helps you calculate accurate deduction amounts later.

The five-year waiting period explained

Pre-construction interest deductions are spread equally across five consecutive years after construction completion. You cannot claim the entire amount in one financial year. The Income Tax Department mandates this five-year distribution to prevent large deductions in single years.

Many taxpayers expect immediate deductions upon completion of construction; instead, they face disappointment. The home loan interest rate you pay during construction determines your total deductible amount. Lower rates mean smaller deductions but also reduced financial burden overall.

This waiting period ensures balanced tax planning across multiple years. Your financial advisor can help you prepare for these staggered deductions properly.

Why early planning matters

Delayed tax planning costs you significant cash flow benefits when construction periods extend. Your monthly budget suffers when you fail to account for future deduction opportunities. Proper planning helps you maximise both current savings and future tax benefits.

Salaried individuals under the old tax regime benefit most from planning. You can adjust your investment declarations knowing these deductions will arrive later. Missing these claims means losing the money you rightfully deserve back from the government.

Step-by-step process to claim pre-construction interest

●       Step 1: Calculate the total interest paid from the loan start until the construction completion date.

●       Step 2: Subtract any interest amounts already claimed in previous ITR filings.

●       Step 3: Divide the remaining balance by five to determine annual deductible amounts.

●       Step 4: Enter the annual deductible amount under 'Interest on borrowed capital' in Schedule HP.

●       Step 5: Ensure total interest deductions do not exceed Rs. 2 lakh limit for self-occupied properties.

Your home loan documentation provides detailed interest breakdowns for each financial year. Keep these records safe as the Income Tax Department may ask for proof. The home loan interest rate affects your total deductible amount across five years.

This example shows how Rs. 5 lakh in pre-construction interest converts to Rs. 1 lakh in annual deductions. Your actual amounts depend on your property cost and loan terms.

Choosing the right home loan partner

Selecting an experienced lender makes claiming pre-construction interest much easier for you. Bajaj Finserv offers competitive home loan interest rate options alongside clear tax benefit guidance. Their documentation standards help you maintain accurate records for ITR filing purposes.

Bajaj Finserv representatives are available to offer personalised advice, including how EMI components split between principal and interest payments. This knowledge proves invaluable when calculating your five-year deduction schedule later.

Features and benefits of home loans from Bajaj Finserv

Bajaj Finserv is a preferred partner for smart home buyers planning ahead:

Types of home loan offerings

 

Fresh home loan

●       A simplified application process reduces documentation hassles significantly.

●       Interest rates starting from 7.99% per annum keep borrowing costs manageable.

●       Flexible tenure options up to 32 years provide EMI affordability.

First-time buyers benefit from early pre-construction interest planning with fresh loans. Clear documentation from day one helps you track deductible amounts accurately.

 

Home loan balance transfer

●       Interest rates start from 8.30% p.a. for transfer cases.

●       Hassle-free transfer process with minimal paperwork requirements.

●       Top-up loans up to Rs. 1 crore provide additional construction funding.

Switching lenders can reduce your total interest burden while maintaining pre-construction benefits. Lower rates mean smaller deductible amounts but also reduced financial strain.

Home loan top-up

●       Quick approval process for additional funding requirements.

●       Flexible usage for home repairs, education expenses, or emergency needs.

●       No restrictions on how you utilise top-up loan amounts.

Additional borrowing for construction-related expenses also qualifies for pre-construction interest deductions. Proper documentation ensures you claim all eligible amounts later.

How Bajaj Finserv supports ITR filing

●       Transparent guidance on document submissions: Doorstep collection services gather the necessary documents efficiently. Clear documentation standards reduce errors when calculating pre-construction interest amounts later. Professional guidance ensures you maintain proper records from the get-go.

●       Expert assistance for tax benefit calculations: Experienced mortgage advisors help borrowers understand EMI breakdowns between principal and interest components. Online calculators and tools help you project five-year deduction schedules accurately. Professional support ensures you maximise available tax benefits properly.

●       Integrated services reduce your tax season workload: Digital portals provide annual statements showing exact interest amounts paid each year. Ready documentation makes ITR filing straightforward when claiming pre-construction benefits.

Why timing your ITR filing matters

The Income Tax Department extended the ITR deadline for FY 2025-25 to 15 September 2025 this year. This extra time allows you to gather proper documentation for pre-construction interest claims. Use these additional weeks to verify your calculations and supporting documents.

Properties completed before 31 March 2025 qualify for deductions starting from Assessment Year 2025-26. Timing affects which financial year you begin claiming five-year deductions. Proper planning prevents missing eligible claims due to timing confusion.

Claiming pre-construction interest deductions requires proper planning, accurate documentation, and the right lending partner. Bajaj Finserv combines competitive home loan interest rates with comprehensive support to ensure you maximise both immediate savings and long-term deductions.

Visit the Bajaj Finserv website or download the app to start building your wealth through property ownership. Take action now to build the foundation for lasting financial security.

Disclaimer: This content is part of a marketing initiative. No TNIE Group journalists were involved in the creation of this content.

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