When home loan is availed against any under-construction property, the tax benefit in respect of interest can be claimed only once the building of the property is finished. The interest paid for the period prior to the economic in which the construction of the property is finished is permissible as deduction in five equal annual installments commencing from the financial in which the construction of the property is finished.
As the building of the flat will be completed in Financial Year 2015, you can claim the deduction towards aggregate interest paid during Financial Year 2015 including one-fifth of pre-construction interest, i.e., up to 31 March 2014. If the flat is measured as “self occupied”, you can avail maximum deduction towards interest up to Rs.1.5 lakh per fiscal. In case of a “deemed to be let property” or “let out property”, entire interest is permissible as deduction against the actual or deemed rent.
With respect to tax deduction on the principal portion of home loan, while there is uncertainty on whether the property should be constructing to claim the same under section 80C, a view may be possible to claim it when the property is under arrangement. This deduction shall be subject to an overall limit of Rs.1 lakh per fiscal.