Can I apply for a tax benefit on the IME of the loan taken out for an apartment under construction?

ET Wealth’s expert panel answers weekly questions related to any aspect of personal finance.


I bought an apartment under construction on loan in October 2019, for which I am paying the IMEs. Is there a tax benefit that can be claimed on IMEs? Taking possession is due in January 2021.


Amit Maheshwari, Partner, AKM Global, responds: The principal amount repaid can be claimed as u / s 80C tax deduction subject to a maximum of Rs 1.5 lakh. However, if the home is sold within five years of possession, the amount claimed as a deduction will be considered income in the year the property is sold. Interest paid can only be deducted once the property is ready for possession. Any interest paid before possession is tax deductible in five installments from the year in which construction was completed, subject to a cap of Rs 2 lakh if ​​the property is self-contained. Thus, if you take possession by the end of March 2021, you can claim the deduction of interest for the current year. In addition, a deduction of Rs 1.5 lakh is also available in the 80EEA for interest paid on the loan for the purchase of a house where the value of the stamp duty does not exceed Rs 45 lakh and the loan is used. in 2019-2020. The benefit is only available on the first residential property. You cannot claim any of the deductions if you opt for the new 115BAC u / s tax regime of the Computer Law.

I have worked with four organizations over the past 20 years. I worked nine years in my first job. Three months after leaving that, I joined a multinational where I worked for six years, then I joined the third multinational where I worked for three years. I withdrew 100% of my EPF every time I left an organization. Finally, I joined a government organization for 2 years, then I withdrew my EPF corpus of Rs 3.9 lakh in 2019-20. Will the last withdrawal be taxable in 2019-2020?

Archit Gupta, CEO of ClearTax, responds: The PF withdrawal is tax exempt only if the following conditions are met: a: The employee has rendered five years of continuous service. The period of service includes service rendered to previous / former employers. B: The balance of the EPF account was transferred from the old employer to the new employer at the time of the change of job. The period of service in the previous job is only included if the PF balance is transferred from the previous employer to the next employer. If an employee withdraws from the EPF account after a resignation, the period of service will not include the period of previous employment. In your case, the employment period for the EPF withdrawal is only two years. The tax exemption conditions for the EPF withdrawal are not met. The total amount of Rs 3.9 lakh is taxable during the year 2019-20.

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