Tax deductions on house construction

Income Tax 1961 Income from Salary
1

I got a house constructed for my parents. I have source the raw materials on own. I have the GST paid for all these materials. Can I get a tax deduction for the GST I paid for raw materials during construction? For example if my tax liability is 1lac from salary and have paid 20k as GST for construction, can I claim it to bring my tax liability to 80k?

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Tax deductions on house construction may include interest on home loans, principal repayment under Section 80C, and additional deductions under Section 80EEA for first-time homebuyers in India.

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3

Hey @Santosh,

No, GST is a type of indirect tax you pay while the tax on your salary is direct tax. You can’t claim GST to reduce your tax liability on salary.

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The benefits of deductions mentioned in this reply may not be applicable to person opting for new tax regime. Pls read sections quoted, before tax calculations.

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1. Deduction on Principal Repayment

Under Section 80C, you can claim a deduction on the principal amount of the home loan.

  • Maximum deduction: ₹1.5 lakh per year

  • Applicable only after construction is completed

  • The property should not be sold within 5 years, otherwise the deduction may be reversed.

2. Deduction on Interest Paid

Under Section 24(b), you can claim a deduction on the interest paid on the home loan.

  • Maximum deduction: ₹2 lakh per year for a self-occupied house

  • For a rented property, the interest deduction can be higher, but the set-off against other income is limited to ₹2 lakh.

3. Pre-Construction Interest

Interest paid during the construction period (before completion) is called pre-construction interest.

  • This interest can be claimed in 5 equal installments

  • The deduction starts after the construction is completed.

4. Conditions for Claiming Deduction

  • The loan must be taken from a bank, housing finance company, or recognized lender.

  • Construction should generally be completed within 5 years from the end of the financial year in which the loan was taken.

  • You must have loan interest certificates from the lender.

5. Joint Home Loan Benefit

If the house loan is taken jointly (for example, with spouse), both borrowers can claim deductions separately if they are co-owners and co-borrowers.

  • Up to ₹1.5 lakh each under Section 80C

  • Up to ₹2 lakh each under Section 24(b)