# Pre-Construction Interest and How to Claim It

> Interest paid before possession isn't deductible then — it's claimed in five equal instalments from the year construction completes, within the ₹2 lakh cap.

_By emi.me Editorial · Reviewed by emi.me Editorial · Updated 2026-06-25_
Source: https://emi.me/learn/pre-construction-interest-explained/

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If you buy an under-construction home, the interest you pay before possession is **not deductible in the years you pay it**. Instead it's totalled up and claimed in **five equal annual instalments**, starting from the financial year in which construction is completed and you take possession — and it must still fit inside the Section 24(b) cap. Like all the home-loan deductions, this applies only under the old regime. These are FY 2025-26 rules and this is general information, not tax advice.

## How it works

During construction the bank disburses the loan in stages and you often pay only the interest on what's been released — the [pre-EMI](/glossary/pre-emi/). Tax law calls the total interest paid from borrowing up to the end of the financial year before completion your **pre-construction interest**. You can't deduct it while you're paying it; you deduct it in five equal slices, one per year, beginning the year you get possession.

## The ₹2 lakh cap still applies

For a self-occupied home the deduction in each of those years — your normal current-year interest *plus* that year's one-fifth slice of pre-construction interest — is capped at **₹2,00,000** in total. So if your regular interest already uses the cap, the pre-construction instalments may give little or no extra benefit.

**Worked example.** Suppose you accumulate ₹5,00,000 of interest over a two-year construction period. From the year of possession you can claim ₹1,00,000 a year for five years (₹5,00,000 ÷ 5). If your current-year interest that year is already ₹1,80,000, only ₹20,000 of the instalment fits under the ₹2,00,000 cap — the rest is lost. For a let-out property the interest is uncapped, so the instalments are more fully usable (subject to the ₹2 lakh loss set-off rule).

## Plan around it

Because the cap can swallow the instalments, buyers of under-construction homes sometimes find the headline "tax benefits" smaller in practice than expected. Estimate your position with the [home loan tax-benefit calculator](/calculators/tax-benefit/), read the broader picture in [home loan tax benefits explained](/learn/home-loan-tax-benefits-explained/), and confirm the treatment of your specific dates with a chartered accountant — possession timing matters here.