Income from house property

Hi

One of my employee has taken home loan for constructing a new house. He is paying interest for that but the building is still under construction and he is staying in a rental house. Is he eligible for HRA?
Can some one clear my doubt?

Thanks

Sandhya

the interest which you are paying shall be taken into account as deduction from the date of the period of the contruction to the date of the contruction.

Further relevent section 24 shall be applicable. The interest payment shall be taken into account as deduction.

HRA shall be applicable.

Dear Sandhya,

I am 50% agree with wils24's reply, i would like to modify it further. The interest which has been paid in the given case is PRECONSUTRUCTION INTEREST. Preconsturction interest means the interest from the date of borrowal of the loan upto the end of the financial year immediately preceding the financial year in which acquistion made or construction was completed. The said pre consturction interest shall be allowed in five equal installments commencing from the financial year in which the property's consturction was completed.

In simple words you have to follow following procedure.

1. Identify the date of borrowal of the loan
2. Identify the date of completion
3. Identify the last date of the financial year immediately preceding the date of completion / Acquisition.
4. Pre consturction period = calculated period from step 1 to step 3
5. Pre consturction Interest = Pre construction period as per step 4 * rate of interest*Amount of Loan
6. Allowable Prior period interest = prior period interest as per Step 5 / 5 equal installment.


In connection with HRA, he can get the benefit of HRA.

I think above information will suffice your requirements. If you need any other information than contact me at my email which is or give me a call on 099873 89930. I am from Mumbai.

Thanks

Ajit


6. Allowable