As per section 24 of Income tax Act, 1961, Interest on borrowed capital is allowable as a deduction if capital is borrowed for the purpose of purchase, construction,repair, renewal or reconstruction of the house property.

However it is to be noted that if money is borrowed prior to acquisition or construction of house property, Aggregated Interest on borrowed capital is also allowable as deduction in five equal annual installments starting from the year in which acquisition or construction is completed as a pre-construction period Interest. Pre-construction Interest deduction is not allowable for renewal, repair or reconstruction of house property.


Person took home loan on April, 2009 for Rs.10, 00,000 for construction of house property carried Interest @ 10% p.a.. Construction completed on April 2011 and person has paid Rs.2, 00,000 as interest during financial year 2009-2010 and 2010-2011.

Key Data:

Loan taken on                                        : April 2009

Construction completed on                : April 2011

Pre- construction period                     : From April 2009 to April 2011

Pre- construction period interest     : Rs.2, 00,000

Interest Deduction                                : Rs.40, 000 from financial year 2011-12 (AY 2012-13) onwards in 5 equal Annual    installments

Please note that only Pre construction period interest is allowed as deduction and not principal repayment.

Pre EMI Interest:

Normally we find word ‘Pre EMI Interest’ in Bank Statement and Tax certificate provided by bank for home loan.Here Pre EMI interest is different from Pre construction interest. Pre EMI interest is levied by bank for the period between date of disbursement and start of first EMI.


In the above example bank has disbursed Rs.10, 00,000 on April 2009 but EMI starts from July 2009. Hence Interest from April 2009 to July 2009 will be treated as Pre EMI Interest.

There is no connection between Pre construction Interest and Pre EMI Interest.

IF home loan is taken for the purpose of purchase, construction, repair, renewal or reconstruction, interest there on is allowed on accrual basis under section 24 of Income tax Act,1961

As per section 24 of Income tax Act, Maximum amount of Interest  permissible in case of self occupied property is Rs.1,50,000 per co owner subject to actual Interest paid if the following conditions are satisfied;

1. Home loan is taken on or after 1st April, 1999 for acquiring or constructing a property.
2. Loan taken prior to 1st April, 1999 is eligible for maximum deduction of  Interest up to Rs.30000 only.
3. Acquisition/Construction should be completed within three years from the end of financial year in  which capital is borrowed. e.g. loan is borrowed on 2nd July, 2005 hence acquisition or construction should be completed by 31st March, 2009 i.e. three years from 31st March, 2006.
4. Person has to certify that Loan is taken for acquisition or construction of house or to repay principal amount outstanding under previously taken loan for acquisition or construction.
5. However for repairs, renewal or reconstruction maximum deduction of Rs.30000 is allowed and not Rs.150000.

Co ownership

E.g.IF person and his wife is co owner of house property then deduction of Rs.150000 is allowable to both husband and wife. Please note following points in this regards;
1.  Ceiling of Rs.150000 is set for Self occupied property.
2. Persons should be co owner of property and their names should be mentioned in registered sale deed.
3. Their share of property should mention in sale deed in the absence of any such information ownership deemed to be equal between all co owners.
4. For claiming home loan interest deduction, each co owner must have taken loan jointly.
5. If persons have taken loan from more than one bank but for the same house property then also deduction is allowed.

Apart from Home loan interest deduction, persons can claimed deduction U/s 80 C for repayment of principal on home loan within overall limit of Rs.1,00,000 per person. 

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For applying home loan , following list of documents require: 

01. Salaried person:
i.  Home loan Application Form along with one passport size photograph
ii.  Identity Proof (e.g. PAN Card, Driving License)
iii. Address Proof (e.g.Telephone Bill, Driving License)
iv. Income proof (Last month salary slip)
v.  Form No.-16 for previous year
VI. Income tax return for previous year
vii. Banks statement of previous six months

02. Self employed Businessmen/Professionals:
i.  Home loan Application Form along with one passport size photograph
ii.  Identity Proof (e.g. PAN Card, Driving License)
iii. Address Proof (e.g.Telephone Bill, Driving Licence)
iv. Certificate of educational/professional qualifications
v.  Proof of business establishment 
vi.  Income tax return for previous 3 years- Individual 
vii. Income tax return for previous 3 years- Business/Profession 
vii. Profit and Loss account and Balance sheet of previous 3years 
ix. In case of Business, some brief detail about business. 
x.  Banks statement of previous six months

Along with above list of documents for both categories of applicant, cheque of processing fees should be provided.

Kindly note that above mention list of documents are minimum requirement for applying home loan. Requirement of additional documents will vary from bank to bank.


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