In this article I will be writing about the land loans and the tax benefits involved in land loans. Not all the land loans are eligible for tax benefits, there is certain regulations to get the benefits on loan repayment of the land loans. Many people are assuming that only the home loans are eligible for tax exemption, but the land loans are not eligible for tax deduction. The intention of this article is to explore the option for availing tax benefits on land loans with suitable example scenario. If you have any doubts, please post it in the comments section. I will be happy to answer all your questions. You can subscribe to our future articles here.
Rules on Land Loans
1. Tax Benefits
It is not allowed to claim the tax benefits for only the land loans. But, you can claim the tax benefits if you are constructing a house on the land purchased, then the entire amount is can be deducted as tax exemption.
2. Construction Phase
You can get the tax benefits only after the completion of the house construction. The period when the construction is happening, you are not eligible to claim the tax benefits. The construction of the house must be started on the given time by the banks or income tax authority. It is 2 years from the date of availing the loans. If you are not able to start the construction of the house, then it will be considered as the commercial loans and no exception on the tax benefits.
SBI is offering the SBI Reality Home Loans for the purpose of buying the land and constructing the house. They have mentioned in the site as:
House construction should commence within 2 years from the date of availment of ‘SBI-Realty’ Housing Loan
Customers are also eligible to avail another Housing Loan for construction of house on the plot financed above with the benefit of running both the loans concurrently.
3. Principal Repayment while Construction
If you have paid principal amount as part of the loan repayment during the house construction, the amount can not be claimed for the tax deduction. Only the interest paid can be claimed as tax deduction during the construction period. This is an important point to consider while availing the home loans and thinking of the tax benefits.
4. Interest Paid
If you paid the interest during the construction phase, you can claim the tax benefits in five consequent years of equal installments.
5. Example
For example Mr.X got the loan of Rs.300000 for buying the land. Later he also got the loan of Rs.800000 for constructing the house. In this case, he is eligible to claim the tax benefits on interest paid for the entire amount Rs.1100000. But, the tax deduction can be claimed only after the construction of the house is completed.
Summary
In this article I have explained about how to get the tax benefits for land loans. This idea will be useful when you are buying the land and constructing the house on it. Thank you for reading this article. If you have any doubts please post it in the comments section. You can subscribe to our future articles here.
July 27, 2009 at 5:49 am
Sir,
I Have taken an ‘SBI-Realty Home loan’ on June 2008. I started repayment form july 2008.Will I get Tax benefits for the same. kindly reply at the earliest.
Thanks
R.G.Unnikrishnan
March 26, 2012 at 9:42 am
Dear RG,
What are the documents you have submitted to SBI to proove that the construction is started within 2 yrs. I heard that if construction not started the loan will be considered as a commercial loan.
Pls reply.
-ND
August 7, 2009 at 11:12 pm
Yes..you can avail the tax benefits.
Thanks,
Krishna
September 22, 2009 at 2:09 am
Hi Krishna
Land is with my wife name in such scenario will i be able to get the construction loan.
Can i eligible for the tax excemption once the construction is over.
Regards,
Jay
February 15, 2010 at 12:58 am
1. I do not want to build a house, will i get tax benefit on a Land Loan?
2. If I need to build a house, what is the minimum I need to have to claim benefit – 4 walls, ceiling, etc..
3. Can I build a house with part of the money sanctioned for land loan?
4. Can I take land loan for buying the property, build a house in my own money and claim tax benefits for the land loan?
February 7, 2011 at 12:03 am
r,
I Have taken an ‘SBI-Realty Home loan’ on May 2010. I started repayment form June’2010.Will I get Tax benefits for the same. kindly reply With Which Section is Eligible at the earliest.
Thanks
devendiran.
March 26, 2012 at 9:43 am
Dear Dev,
What are the documents you have submitted to SBI to proove that the construction is started within 2 yrs. I heard that if construction not started the loan will be considered as a commercial loan.
Pls reply.
-ND
August 31, 2011 at 7:12 am
will I get a tax exemption for doing the agriculture ex :- Fertilisers and pesticides bills.
Purchase of lands for doing agriculture and other expenses involved for doing agriculture like Tracker rent and labour etc.
Regards,
Nadamunireddy.K
9741420390.
September 5, 2011 at 10:55 am
sir,
i have not applied for PAN CARD. now i want to help my husband to buy a land for which we have to go for loan. will it be possible that i can file my tax returns atleast for 2 years in one stretch after getting the PAN CARD. kindly advice me.
thanking you.
September 28, 2011 at 10:27 pm
Hi,
My wife bought an house.When she bought that house she was doing Job and the house is registered on his name.
After registration is done, she quit the Job for some personal reasons.
So, i am paying the EMI instead of her.
Can i claim that money for tax exemption. if so, how can i do that.
please do the needful.
regards
Murali
February 16, 2012 at 11:59 pm
sir,
I had taken a Reality Home Loan for Land Purchase From SBI in the month of FEB 2012. Will I get the tax benifit? Plz Reply as early as possible
April 11, 2012 at 12:51 am
Dear mangal Das,
What are the documents you have submitted to SBI to proove that the construction is started within 2 yrs. I heard that if construction not started the loan will be considered as a commercial loan.
Pls reply.
-ND
April 2, 2012 at 11:16 am
Dear Sir ,
I bought a land for Rs. 5 lakhs . I took a land loan of 3, 60,000 from IDBI bank . At present I do not have the idea of constructing a home in the land . I am paying 5600 every month as interest for that loan .Can I show this interest money for Tax benefit or not . Please advise .
Thank you
zubeir
June 13, 2012 at 9:21 pm
Hello Mohammed,
You can not claim the tax benefits for the land loans alone. For that you have to get the reality loans like one offered by the SBI.
https://www.sbi.co.in/user.htm?action=viewsection&lang=0&id=0,1,20,115,741,786
Thanks,
Krishna
June 14, 2012 at 12:56 am
Dear Krishna,
Please let me know to avail tax exemption for SBI Realty Loan. I have taken SBI Realty Loan in Jan-2011 and not started the construction on plot purchased.
Thanks,
ND
June 14, 2012 at 1:44 am
Hello ND,
Thank you for replying back to my comments.
Please follow the steps to claim the tax benefits:
1. Get the reality loan
2. Buy the plot for house construction
3. Start the construction before 2 years of getting the loan
4. Complete the construction
5. Submit your documents of constructions and possession certificate to claim the tax benefits.
Note that, before completing the construction, you will not be able to claim any tax benefit. That means don’t think about submitting the proofs for tax exception.
If you have more doubts, please write it here.
Thanks,
Krishna
May 22, 2012 at 6:35 am
Hi,
I am planning to purchase a land with cost of approx. 12Lacs.I have applied with Sbi,
1) as i am salaried.My wife runs coaching/tution classes.The bank says that income from such sources can’t be considered for loan with reasons.I want my wife to be co-applicant to get maximum amount sanctioned.
What solution can be bring in to get maximum amount sanctioned?
2) I am not planning to construct house on that land before 5 years,against bank’s notification.I don’t want to pay more interest.Any solution on that?
3) Taking land loan (12 lacs) first & then home loan(25 lacs) will be a big burden on finance.How to manage it? taking it for longer period is good but EMI on that cost more.Advice on these.
Thnank You
June 13, 2012 at 9:20 pm
Hello Raj,
1. If you want to use your wife’s income for the loan eligibility, you must show them the ITR filing to consider. Without that they will not agree for the income proof for your wife.
2. If you don’t to construct a house immediately, then please buy only the land and construct only when you can finance it. Buying land is good option, it may get good appreciation in the future, so need not worry.
3. It is difficult for me to guide without your income details. It depends on your monthly income and expenses to decide your personal financial plan.
Thanks,
Krishna
June 13, 2012 at 12:51 am
hi sir, I have availed SBI Reality home loan for a purchase of a plot. I am planninig to pay it off within one year without constructing a house. shall i get income tax benefit over the repayment of principle and intrest please reply fast………
June 13, 2012 at 9:15 pm
Hello Maled,
No. You can avail the income tax benefits only when the construction is completed. Not the following points:
1. Principal paid while construction phase can not claimed for ever.
2. Interest paid while construction can be claimed on five installments after the construction is completed.
3. The construction of the house must be started within two years of taking the loan.
Thanks,
Krishna
June 19, 2012 at 8:40 am
Hello Sir,
I have recently taken Land loan of Rs 30 Lakhs from ICICI in Nov 2011. Also in Feb 2011, I further took a construction loan of Rs 15 Lakhs from ICICI Bank. The house construction is complete in this month. Am I eligible for tax benefit for the entire payable EMI (including EMI for land loan and EMI for construction loan?
If so, then please suggest what documents would I need to furnish for the tax benefit. Unfortunately ICICI officials mention that the Land Loan EMI cannot use used for tax benefit.
Thanks,
DSK
June 19, 2012 at 8:49 am
Hello Sir,
Corrections to above Post:
Land Load taken in Nov 2011
Construction Loan taken in Feb 2012
Regards,
DSK
June 19, 2012 at 9:16 am
Hello DSK,
I think you have done a mistake of taking two separate loans for buying the land and constructing the house. There is no tax exemption for the land loans. Most of the banks offer home loans for buying the land and constructing the house. In that case, you can claim the entire amount as the tax exempt.
In your case, you can claim only the construction loan.
I hope this clears your doubts.
Thanks,
Krishna
July 10, 2012 at 12:44 am
Dear Sir,
I have taken home loan with SBI home loan to purchase a plot. Now I am not in a position to construct a home at this place. Probably I made a mistake taking home loan for plot purchase. I am even ready to close the loan. Will the bank allow me to close the loan? Please let me know the disadvantages and the steps I have to take to close the loan? What are the charges I will face?
Regards,
Velu
July 10, 2012 at 1:09 am
Yes you can close the loan after 6 months. There is no extra charge for pre-closure.
July 10, 2012 at 4:20 am
Hello ND,
Thank you for your comments. Keep up the good work!!
Thanks,
Krishna
July 10, 2012 at 4:19 am
Hello Velu,
Home Loans will not be given only for purchasing the land. They would have given the reality loan which is used for purchasing the land and constructing the house. If you want to payback, then talk to the bank.
In the normal case, most of the banks will not allow you to close it before 6 months. You have to wait for 6 EMIs to be completed. After that, you have to pay the % of pre closing charges if applicable or without pre closing charges.
But, the process would vary for each bank. I would suggest you to talk to the customer care executives in the bank to get more details.
Thanks,
Krishna
August 2, 2012 at 1:28 am
Thanks a lot Krishna. I will talk to customer care executive.
Regards,
Velu
July 31, 2012 at 1:30 am
Sorry, if i am repeating the question:
I want to purchase a land and I am not planning to construct house in 2 years. I have two options.
1) Take land loan which doesnt have any tax exemption and interest rate is high.
or 2) Take home loan which has lower interest rate and close it within 2 years. So my doubt is will I get tax exemption in 2nd option for the interest paid for first 2 years? If yes when can I claim this? After two years or this year itself?
August 1, 2012 at 12:19 am
Hi Krishna,
I want to purchase a land by taking land loan, but I want to construct house within 2 years on another land which is in the name of my father. In this situation, can avail tax benefit both on land loan and home loan.
August 1, 2012 at 12:22 am
Hi Krishna,
One more query, if I will take a land loan, and my husband will construct a house within 2 years , then can he avail tax benefit on home loan?
August 1, 2012 at 1:13 pm
No, Both the parties can not take loan on same plot. Only you can take add on loan to construct a house on purchased plot.
August 2, 2012 at 2:42 pm
dear sir,
i have taken a home loan for purchasing a flat. the constructon is goind on and it will be completed by October 2012 (this year). I am paying EMI to the bank (PRINCIPAL & INTEREST). Can I claim tax exemmption for this loan. This is my second flat.
November 5, 2012 at 10:55 pm
Hi,
I m planning to buy land from my brother-in-law. But i m not gonna take this on my name and it will be on my wife name and instead of registration we ll go for Donation kind of. In this case will i be able to get the housing loan?
Please advice.
November 16, 2012 at 12:57 pm
sir, I want to purchase a site i will pay 60% and i need a 40% loan i am working in govt sect and my wife is working in mnc both of our income is around 60 thousand per/mnth is it posbl to get 20 laks loan from sbi
November 16, 2012 at 12:59 pm
sr, I want to purchase a site i will pay 60% and i need a 40% loan i am working in govt sect and my wife is working in mnc both of our income is around 60 thousand per/mnth is it posbl to get 20 laks loan from sbi
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