How to calculate Pre construction Interest? –

- Calculate the Pre construction period of constructed house property. It is from the year of home loan taken till the year in which construction is completed. However, the interest will be allowed from the date of loan taken till the 31st March before the financial year in which construction is completed.
- Calculate the interest paid during the pre-construction period from the interest certificate issued by the bank. Each year the lending bank issues an annual home loan certificate which provides details of total EMI paid along with Interest and Principal Repayment.
- Divide the total pre construction interest in 5 equal installments. Claim the deduction of pre-construction interest from the financial year of completion of construction while filing ITR on the Income Tax e-Filing portal under the head “Income from House Property”.

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How to calculate Pre construction Interest? –

- Calculate the Pre construction period of constructed house property. It is from the year of home loan taken till the year in which construction is completed. However, the interest will be allowed from the date of loan taken till the 31st March before the financial year in which construction is completed.
- Calculate the interest paid during the pre-construction period from the interest certificate issued by the bank. Each year the lending bank issues an annual home loan certificate which provides details of total EMI paid along with Interest and Principal Repayment.
- Divide the total pre construction interest in 5 equal installments. Claim the deduction of pre-construction interest from the financial year of completion of construction while filing ITR on the Income Tax e-Filing portal under the head “Income from House Property”.

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Contents

### When will the pre-construction interest be calculated?

Calculation of amount paid for Pre-construction interest –

- As explained above, the pre construction interest will be allowed in five equal installments from the year in which the construction is completed
- The interest will be allowed from the date of loan taken till the 31st March before the financial year in which construction is completed.
- In this case, the construction is completed in December 2019 so the pre-construction interest will be calculated for 17 months for the period November 2017 till March 2019.

Financial year | Period | EMI calculation |
---|---|---|

2017-18 | November 2017 to March 2018 | Rs.25,000 x 5 = Rs.1,25,000 |

2018-19 | April 2018 to March 2019 | Rs.25,000 x 12 = Rs.3,00,000 |

Total | = Rs.4,25,000 |

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So Kunal will be able to claim Rs.1,65,000 + Rs.46,750 = Rs.2,11,750 as deduction towards home loan interest in FY 2019-20.

### What is pre-construction period in a home loan?

Calculation of amount paid for Pre-construction interest –

- As explained above, the pre construction interest will be allowed in five equal installments from the year in which the construction is completed
- The interest will be allowed from the date of loan taken till the 31st March before the financial year in which construction is completed.
- In this case, the construction is completed in December 2019 so the pre-construction interest will be calculated for 17 months for the period November 2017 till March 2019.

Financial year | Period | EMI calculation |
---|---|---|

2017-18 | November 2017 to March 2018 | Rs.25,000 x 5 = Rs.1,25,000 |

2018-19 | April 2018 to March 2019 | Rs.25,000 x 12 = Rs.3,00,000 |

Total | = Rs.4,25,000 |

ul>

So Kunal will be able to claim Rs.1,65,000 + Rs.46,750 = Rs.2,11,750 as deduction towards home loan interest in FY 2019-20.

### How is a construction loan structured for interest only?

How To Calculate Interest Only Payments On Construction Loan? (Solution) – Carpentry and construction business Make a note of the daily interest.

- Multiplying the loan sum by the interest rate (in percent) yields the answer. Calculate by multiplying this quantity by 365 (the number of days in a year)
- The daily value should be multiplied by the number of days during which the account was in that balance.

The first interest-only payment is determined as the difference between the maximum loan and the cost of construction, less the interest-only payment of the maximum loan. Construction loans are structured so that the final interest-only payment is computed as if it were an interest-only payment for the whole loan amount. This payment will cover the remaining principle and interest on the loan for the remaining 30 years of its duration.

#### How to claim pre-construction interest in ITR?

How to calculate Pre construction Interest? –

- Calculate the Pre construction period of constructed house property. It is from the year of home loan taken till the year in which construction is completed. However, the interest will be allowed from the date of loan taken till the 31st March before the financial year in which construction is completed.
- Calculate the interest paid during the pre-construction period from the interest certificate issued by the bank. Each year the lending bank issues an annual home loan certificate which provides details of total EMI paid along with Interest and Principal Repayment.
- Divide the total pre construction interest in 5 equal installments. Claim the deduction of pre-construction interest from the financial year of completion of construction while filing ITR on the Income Tax e-Filing portal under the head “Income from House Property”.

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