The Income Tax Return (ITR) filing deadline for Assessment Year (AY) 2025-26 has been extended by the Income Tax Department till September 15, 2025 for individuals whose accounts are not subject to audit. This extension gives salaried taxpayers more time to gather documentation and prepare their returns.
Among the various deductions available to taxpayers, the interest paid on housing loans qualifies for tax exemption under Section 24(b) of the Income Tax Act, 1961. However, there is a key exception — the interest paid on under-construction properties, also known as pre-construction interest, cannot be claimed immediately. This article will help you understand how and when to claim this deduction in your ITR for AY 2025–26.
What is Pre-Construction Interest?
Pre-construction interest is the interest paid on a home loan for the period before the construction of the property is completed. According to the Income Tax Act, interest paid on a housing loan is eligible for deduction only from the year in which construction is completed and possession is obtained.
This means if you took a loan for an under-construction house, any interest paid before the financial year in which construction completes is considered pre-construction interest.
Tax Deduction on Pre-Construction Interest under Section 24(b)
Section 24(b) of the Income Tax Act allows a deduction of up to ₹2,00,000 per annum on interest paid on home loans for a self occupied property. For let-out properties, there is no upper limit on the interest deduction, but the total loss from house property that can be set off against other income is capped at ₹2,00,000.
For pre-construction interest, the law allows you to claim this interest in five equal installments starting from the year in which the construction is completed or the property is acquired.
For example:
- You took a home loan in April 2021 and paid interest of ₹3,00,000 till March 2024.
- The property was completed in December 2024 and possession was received in February 2025.
- You can claim ₹60,000 (₹3,00,000 ÷ 5) every year from FY 2024-25 onwards for five years, in addition to the regular interest for that financial year.
Conditions to Claim Pre-Construction Interest
To be eligible to claim this deduction:
- Construction must be completed within 5 years from the end of the financial year in which the loan was taken.
- The interest should pertain to the period before the year of completion of construction or acquisition.
- You must have a completion certificate or possession letter from the builder or competent authority.
- The property must be in your name, and you must be the borrower of the loan.
How to Claim Pre-Construction Interest in ITR (AY 2025-26)
Follow these steps to correctly claim the deduction:
- Calculate Total Pre-Construction Interest
Gather loan statements from your lender and calculate the total interest paid from the date of loan sanction to the end of the financial year preceding the year of completion. - Divide the Amount in Five Equal Installments
Divide the pre-construction interest into five equal parts. - Claim the 1/5th Portion in Schedule “Income from House Property”
While filing your ITR, go to the “Income from House Property” section. Enter the 1/5th pre-construction interest along with the regular annual interest under deductions under Section 24(b). - Maintain Documentation
Keep all proofs such as the interest certificate from the bank, completion certificate, and loan agreement in case the Income Tax Department seeks verification.
Important Points to Remember
- You cannot claim the full interest in one year.
- The deduction is allowed only from the year of completion, not during the construction period.
- If you sell the property before the end of the 5-year period, you lose the remaining deduction.
- This benefit is available under the Old Tax Regime only.
Conclusion
Claiming pre construction interest on a housing loan is an important tax-saving opportunity often missed by salaried taxpayers. With the extended ITR filing deadline for AY 2025-26, now is the right time to organize your documents and calculate eligible deductions under Section 24(b). Ensure that the property is completed and possession is taken before claiming this benefit. Also, always retain necessary proofs to support your claim.
Frequently Asked Questions
1. What is pre-construction interest in home loans?
Pre-construction interest is the interest paid on a home loan from the date of borrowing until the end of the financial year preceding the year in which the construction is completed.
2. Can I claim the full pre-construction interest in one year?
No, you can claim the total pre-construction interest in five equal annual installments, starting from the year the construction is completed.
3. Is there a limit on claiming pre-construction interest?
Yes. For self-occupied property, the maximum deduction (including pre-construction interest) under Section 24(b) is ₹2,00,000 per annum.
4. Can I claim pre-construction interest under the New Tax Regime?
No. The New Tax Regime does not allow most exemptions and deductions, including those under Section 24(b).
5. What documents are required to claim pre-construction interest?
You should have the interest certificate from the lender, completion or possession certificate, loan sanction letter, and property ownership proof.
