Now, Housing Society Certificate Enough To Enjoy Tax Benefits On Home Loan

For Sudhir Kant, a 44-year-old banker, home-buying was not such a mind-boggling experience. His knowledge of the financial world came handy while finalising the home loan option. He was also well aware of the tax exemptions he would get on the principal and interest he paid on his loan amount. He gets up to Rs 2 lakh exemption on interest component under Section 24 of the Income Tax Act and, up to Rs 1.5 lakh exemption on the principal component under Section 80C of the same law— something he knew on his fingertips. 

Things took a different turn, however, when he sought the tax benefits from the department. Apparently, his developers had yet to receive a completion certificate — a legal document issued by a local authority certifying that the construction of a particular building had been done in accordance with set regulations and the premises are fit for occupation.  There were some issues raised by the fire safety department which the developer had not been able to address, and hence the delay in getting the completion certificate.

Let's move back a bit. Kant invested in an under-construction property of a reputed developer five years ago and got the possession only last year. The man with a finance background had prudently opted for a loan plan that allowed him to pay the EMIs (equated monthly installment) only after he got the possession of the unit. And, this is the time when he would apply for the tax exemptions and get to know he entered a building which did not have the legal permission to house residents yet. The fact that Kant would be paying more for basic facilities such as power and water supply infuriated him even more. Apparently, a building that has not received a completion certificate is charged more by local authorities for supply of basic facilities. What was the whole point of being a finance genius if one ends up paying more than one intended, thought Kant. So, does this mean that for a mistake committed by his developer, Kant will have to pay more for basic facilities on the one hand and lose out on his tax benefits on the other? The answer is, no.

The Income Tax Appellate Tribunal's Mumbai Bench in a recent order said the letter from the housing society stating the borrower has the possession of the unit would be sufficient for claiming tax exemption on the loan amount. The Mumbai Bench order could be cited as a precedent by other home owners across the country who might be facing similar troubles. 

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