Pre-EMI Interest Deduction Under Section 24(b) — Under-Construction Property

Updated: 3 June 2026 | Income Tax Act, 1961 — Section 24(b) | Verified

Pre-EMI interest is the interest you pay on a home loan during the under-construction period — before you take possession of the property. Under Section 24(b), this pre-construction interest is not deductible in the year it is paid. After possession, the entire accumulated pre-EMI interest is deductible in 5 equal annual instalments, starting from the possession year. Maximum deduction for a self-occupied property is ₹2 lakh per year (current year interest + 1/5th pre-EMI combined). Under the new tax regime, no Section 24(b) deduction is available for self-occupied property.

1/5th

Pre-EMI interest is deductible in 5 equal instalments starting from possession year
Example: ₹3L pre-EMI accumulated → ₹60,000/year deductible for 5 years after possession (added to current year interest, max ₹2L SOP).

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New tax regime: No Section 24(b) deduction for self-occupied property. From FY 2023-24 onwards, if you opt for the new tax regime, the ₹2L Section 24(b) interest deduction — including the 1/5th pre-EMI instalment — is not available for self-occupied property. The deduction continues for let-out properties even under new regime (but loss set-off is limited).

How Pre-EMI Interest Works — Step by Step

PHASE 1 — UNDER CONSTRUCTION

During Construction Period

The bank disburses the loan in tranches as construction milestones are reached. You pay interest only on the disbursed amount — this is the "pre-EMI." No principal repayment during this phase (unless you opt for full EMI). No Section 24(b) deduction is allowed on this interest in the year of payment. Keep records of all pre-EMI payments made each year.

PHASE 2 — AFTER POSSESSION

From Possession Year Onwards

Full EMI begins. Pre-EMI interest accumulated across all years is totalled.

Annual deduction = Current year interest + (Total pre-EMI ÷ 5)

This combined amount is subject to the ₹2L cap for self-occupied property under old regime. For let-out property, no cap — full interest is deductible (old regime).

Worked Example — Pre-EMI Calculation

Scenario: Loan sanctioned in 2021 for ₹60 lakh. Construction takes 3 years. Possession received in FY 2024-25. Pre-EMI paid across 3 years = ₹3,00,000. Post-possession annual interest = ₹4,80,000.

Year	Phase	Pre-EMI Paid	Current Year Interest	1/5th Pre-EMI	Total Deductible (SOP, old regime)
FY 2021-22	Under construction	₹80,000	—	Not yet	₹0
FY 2022-23	Under construction	₹1,20,000	—	Not yet	₹0
FY 2023-24	Under construction	₹1,00,000	—	Not yet	₹0
FY 2024-25	Possession year	—	₹4,80,000	₹60,000	₹2,00,000 (capped at ₹2L SOP)
FY 2025-26	Post-possession	—	₹4,60,000	₹60,000	₹2,00,000 (capped)
FY 2026-27	Post-possession	—	₹4,40,000	₹60,000	₹2,00,000 (capped)
FY 2027-28	Post-possession	—	₹4,20,000	₹60,000	₹2,00,000 (capped)
FY 2028-29	Post-possession (5th year)	—	₹4,00,000	₹60,000 (last instalment)	₹2,00,000 (capped)

Total pre-EMI = ₹3,00,000. 1/5th = ₹60,000/year for 5 years. For self-occupied property, the ₹2L cap limits the deduction each year even though the actual interest + 1/5th pre-EMI exceeds ₹2L.

Section 24(b) — Old Regime vs New Regime

Aspect	Old Tax Regime	New Tax Regime (FY 2023-24 onwards)
Interest deduction — self-occupied property	Up to ₹2,00,000 per year	NOT available
Pre-EMI 1/5th instalment — self-occupied	Available (within ₹2L cap)	NOT available
Interest deduction — let-out property	Unlimited (actual interest)	Available (but loss set-off capped ₹2L)
Pre-EMI 1/5th instalment — let-out	Available	Available
Section 80C on principal repayment	Yes (within ₹1.5L limit)	NOT available

Important: 5-year construction rule. To claim Section 24(b) deduction of ₹2 lakh (instead of just ₹30,000) on a self-occupied property, construction must be completed within 5 years from the end of the financial year in which the loan was sanctioned. If construction takes longer, the deduction on interest (including pre-EMI instalments) is restricted to ₹30,000 per year. This is a critical condition for under-construction flat buyers with delayed projects.

Frequently Asked Questions

Can I claim pre-EMI interest on an under-construction flat in the same year I pay it?

No. Under Section 24(b) of the Income Tax Act, interest paid during the under-construction period (pre-EMI interest) is not deductible in the year it is paid. The entire pre-construction interest is accumulated and then claimed in five equal instalments starting from the year in which construction is completed and possession is received. So if you paid ₹3,00,000 as pre-EMI interest over three years of construction, you can claim ₹60,000 per year for five years after possession — not ₹3 lakh in the year of possession.

Should I pay full EMI during under-construction to save tax later?

From a pure income tax perspective, paying only interest (pre-EMI) during under-construction and paying principal after possession gives you five-year deduction on the accumulated interest. However, if you pay full EMI during construction, the principal portion reduces the loan faster. The principal repaid during construction is eligible for Section 80C deduction in the year of payment (under old regime). So both approaches have tax benefits: pre-EMI interest gives Section 24(b) deductions post-possession; full EMI gives Section 80C on principal during construction. The choice should primarily be based on cash flow, not just taxes.

Is there a maximum limit on pre-EMI interest deduction under Section 24(b)?

The 1/5th of pre-construction interest each year, when added to the current year's interest, is subject to the overall Section 24(b) limit. For a self-occupied property, the total deduction (current year interest + 1/5th pre-EMI) is capped at ₹2,00,000 per year under the old tax regime. Under the new tax regime, no deduction under Section 24(b) is available for self-occupied property from FY 2023-24. For let-out property, there is no upper limit under the old regime — the full interest (including 1/5th pre-EMI) can be claimed, though loss from house property can only be set off against other income up to ₹2L per year.

Is pre-EMI interest available under the PMAY (Pradhan Mantri Awas Yojana) scheme?

PMAY provides a Credit Linked Subsidy Scheme (CLSS) on the interest of the home loan — not on pre-EMI specifically. Under CLSS, eligible beneficiaries get an upfront interest subsidy credited to their loan account, which reduces the principal outstanding. Pre-EMI interest during construction is still a reality for under-construction projects under PMAY. The Section 24(b) treatment (five-year split post-possession) applies the same way for PMAY beneficiaries. The subsidy itself is not taxable income for the borrower.

What happens to the remaining pre-EMI deduction if I sell the property within 5 years of possession?

If you sell the property before claiming all five instalments of pre-construction interest, the remaining unclaimed instalments are lost — you cannot claim them in the year of sale or carry them forward. However, the pre-EMI interest may be considered as part of the cost of acquisition for computing capital gains tax, effectively reducing your taxable capital gain on sale. This is a common planning point: if you are selling within 5 years, ensure that unclaimed pre-EMI is added to the cost of acquisition in your capital gains computation (consult a tax adviser for this).

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