A home loan attracts a significant amount of saving from income tax. But there
are no tax benefits on a loan taken to acquire a plot of land. Therefore, a home
loan brings a significant tax incentive for the borrowers, especially for those
in the high taxable bracket. There are no tax benefits for purchase of plot of
land. But if you are buying a plot for construction purpose you can get a tax
sop on loan. In such a case, the total amount will be combined i.e, loan for
purchasing a plot and loan for construction of house or villa is combined and
you will get the tax benefit on the entire amount.
The tax deductions will be applicable only in the year in which the construction is completed. In that year interest on land loan as well as the construction loan till the end of the previous year shall be taken together and one-fifth of this cumulative interest plus the interest payable for the specific year will be eligible for deduction. The principal repayment you make on your home loan is also eligible for income deduction under Section 80C.
The tax deductions will be applicable only in the year in which the construction is completed. In that year interest on land loan as well as the construction loan till the end of the previous year shall be taken together and one-fifth of this cumulative interest plus the interest payable for the specific year will be eligible for deduction. The principal repayment you make on your home loan is also eligible for income deduction under Section 80C.
