Can interest deduction be claimed even if possession of house is not taken?

Someone Asked on yahoo Answer-replied by me on 1/11/06.

I have taken a Home Loan for an under onstruction property and have been paying EMI with interest and principal payments since April 2006. Since i am yet to take possession of the House, can i claim the tax benefit on the interest and principal components in this Financial Year?

No , you can not claim interest , but principal amount upto Rs 1,00,000 can be claimed as deduction u/s 80C of the I T Act..

But when you get the Completeion certificate from that F.Y.You compute all interest paid upto that month and devide by four . From that F.Y onwards to three years (total four years), you can additioanlly claim dedcition of Interest as deduction from house property income which in your case , if you reside , shall be NIL.

The Explanation attached to Section 23 of the I T Act has this provison “Where the property has been acquired or constructed with borrowed capital, the interest, if any, payable on such capital borrowed for the period prior to the previous year in which the property has been acquired or constructed, as reduced by any part thereof allowed as deduction under any other provision of this Act, shall be deducted under this clause in equal instalments for the said previous year and for each of the four immediately succeeding previous years.”

So there you are , divide by four of all you interest accumulated upto the month of completion , be happy to claim additional interets upto Rs1,50,000