Tax Benefits on Pre-EMI 2026
The final amount to be repaid every month is calculated in a way that it stays static over the entire repayment period. EMI only starts once the loan is disbursed by the bank/ financial institution.
There are multiple factors governing the amount of EMI to be paid. These are the principal loan amount, loan tenure, mode of calculation of interest, and interest rate.
With a longer loan tenure, the EMI amount goes lower; with a shorter loan tenure, the EMI amount becomes higher as you have substantially lesser time to repay your loan.
In case of longer loan tenures, the principal component is less and the interest component is more during initial stages. This starts working in reverse, over the years, and the principal component becomes more while the interest component gets lesser.
The reason behind this is simple. During the initial years, the outstanding loan amount is higher, but with the years the outstanding amount becomes lesser.
The interest paid during the Pre-EMI period qualifies for deduction under Section 24(b) of the Income Tax Act, 1961 after completion of construction (under the Old Tax Regime).
What is a Pre-EMI?
On availing a home loan, Pre-EMI is relevant when the building's construction is yet to be completed. For an apartment under construction, the builder's payment is somewhat dependent on the stages of construction. The amount of time required for the completion of the building construction depends on the speed with which the builder works, which further depends on various factors.
Owing to these reasons, the complete sum for the apartment/building is not disbursed to the builder. The disbursement is made partially, and is linked to the various stages of construction. As mentioned earlier, the loan repayment (EMI) starts only after the full loan amount has been given to the builder. Despite this arrangement, the borrower needs to pay EMIs even during the partial loan disbursements - these EMIs are known as Pre-EMIS. Please note, that the interest component (to be paid on pre-EMIs) is the amount of interest accrued on the amount disbursed until then.
Taxes During Pre-EMIs
Only after the construction of the building (for which the loan has been availed) has been completed can a tax deduction on the pre-EMIs (for the preconstruction period) can be availed. For the Assessment Year 2026-27, these deductions are only available if you opt for the Old Tax Regime. Under the New Tax Regime, no tax exemptions are permitted for interest on self-occupied properties under Section 24. On completion of the construction, the total pre-EMI interest paid, in the subsequent years, is deductible in 5 equal instalments.
For instance, on a Pre-EMI of Rs.5 lakhs, Rs 1 lakh will be depicted as tax deduction for the next 5 years. Pre-EMI is only the interest paid during the period. Please note that any principal amount is not eligible for tax deduction. The interest payable for the year of completion of construction, (inclusive of interest payable for the years during which the construction anticipated to be completed) is deductible under Section 24 up to a limit of Rs. 2 lakhs for self-occupied properties in the Old Regime.. All the interest payable, with reference to the periods until the year of construction, needs to be aggregated. This is allowed as a deduction in 5 EMIs. This starts from the year of completion of the construction. However, if you are using the New Tax Regime, you can only claim interest deductions if the property is rented out, and
Any net loss from the house property cannot be set off against your salary.
Sometimes capital repayments on the loan are made during the years of the building being under construction. In this case, no tax deductions are applicable on this. If the capital repayment is made after the completion of the property construction, then it is eligible for deduction, under Section 80 C in the Old Regime, with an upper limit of Rs. 1.5 Rs. It is important to note that Section 80 C deductions for principal repayment are completely unavailable under the New Tax Regime for AY 2026-27.
Pre-EMI tax benefit case study
In order to understand the implications of tax benefits on Pre-EMIs paid towards a loan, check out the example mentioned below.
Kritika took a home loan of Rs.20 lakh in April 2022 to construct a residential property in Kanpur. The construction was completed in June 2025, and the property was rented out starting July 2025.
During the construction period, she paid only interest (Pre-EMI), since the principal repayment had not started.
Understanding the Pre-Construction Period
The time between when you take the loan and the end of the financial year before the house is completed is known as the pre-construction period.
In Kritika’s case, the loan was taken in April 2022, and the construction was completed in June 2025. So, the pre-construction period runs from April 2022 to 31 March 2025. During this period, any interest paid cannot be claimed immediately in your tax return.
In Kritika’s case, the loan was taken in April 2022, and the construction was completed in June 2025. So, the pre-construction period runs from April 2022 to 31 March 2025. During this period, any interest paid cannot be claimed immediately in your tax return.
How much interest did she pay?
Assume that Kritika paid Rs.3 lakh as interest during the construction period. As per Section 24(b) of the Income Tax Act, 1961, the interest of Rs.3 lakh cannot be claimed all at once. It must be divided into 5 equal parts. It can be claimed starting from the year the house is completed. So:
Rs. 3,00,000/5 = Rs.60,000 per year
She can claim Rs.60,000 every year for five years starting from FY 2025-26.
Interest Paid After Completion
As the house was completed in FY 2025-26, she paid regular interest of Rs.1,90,000 and the pre-construction installment of Rs.60,000. So, the total interest for the year becomes Rs.2,50,000.
Now there are two ways to claim. One is Old Tax Regime and the other is the New Tax Regime.
With Old Tax Regime
Case 1: If the house is rented
- There is no upper limit on interest deduction.
- But the total loss from house property that can reduce her salary income is limited to Rs.2,00,000 per year.
- Any remaining loss can be carried forward for 8 years.
Case 2: If the house is self-occupied
- The maximum interest deduction that is allowed is Rs.2,00,000 per year.
- This Rs.2 lakh limit includes both regular interest and pre-construction interest installment.
So even though the total interest is Rs.2,50,000, she can claim only Rs.2,00,000 in that year. Also, to claim the full Rs.2 lakh benefit, the construction must be completed within 5 years from the end of the financial year in which the loan was taken, otherwise the limit will reduce to Rs.30,000 per year.
With New Tax Regime
- The deduction under Section 80 C is not available.
- For self-occupied property, interest deduction under Section 24(b) is not allowed.
- Loss from house property cannot be adjusted against salary income.
Tax benefits under the Income Tax Act, 1961
Check out the tax benefits that you will be able to avail for the payment of interest under Section 24 and Section 80C of the Income Tax Act, 1961.
Deduction amount permitted under Section 24 for interest payment
Completion Status | Self-Occupied Property | Not Self-Occupied Property |
Completed in 5 years | Rs.2 Lakh under Old Tax Regime. | No limit |
Completed after 5 years | Rs.30,000 | No limit |
Difference between tax benefits that can be availed under Section 80C and Section 24
Particulars | Section 80C | Section 24 |
Tax deduction applicable for | Principal | Interest |
Tax deduction basis | Paid | Accrual |
Total amount of tax deduction applicable | Rs.1.5 lakh | In case of self-occupied property: Rs. 2,00,000 (Under the Old Tax Regime) In case of non- self occupied property: No limit |
Loan offered for | Purchase or construction of a new house property | Construction, reconstruction, repair, renewal or purchase of a residential property |
Tax deduction eligibility criteria | Nil | Construction or purchase has to be completed within 5 years |
Restriction on the sale of property | Tax deductions claimed are subject to be reversed if property is sold within 5 years | Nil |
FAQs on Tax Benefits on Pre-EMI
- When can I start claiming tax deduction on the pre-EMI of my home loan?
You can start claiming tax deduction on the pre-EMI of your home loan only after the construction of the property has been completed. The tax deduction on the total interest paid during the construction period can be claimed in five subsequent years in five equal instalments. This is deducted under Section 24 of the Income Tax Act under the Old Tax Regime. This deduction is not available for self-occupied property under the New Tax regime.
- How much is the total tax deduction that I can claim for interest paid on home loan?
The total income tax deduction that you can claim on the interest component of a home loan is Rs.2 lakh under Section 24 (B) of the Income Tax for self-occupied property under the Old Tax Regime. This is the aggregate amount allowed for a maximum of two self-occupied properties.
- Can I claim tax benefit on the pre-EMI interest if I sell the property before taking possession of it?
If you are paying pre-EMI on your home loan but sell the property before taking possession of it, you cannot claim deduction under Section 24(b). However, you can claim the interest paid as cost during computation of capital gains when the property is finally legally sold.
- Can I avail pre-EMI on a home loan for an already constructed house or a ready-to-move flat?
The pre-EMI option for a home loan can only be availed for a property that is under construction. This is because the loan amount is disbursed in tranches according to the requirements at the different stages of the construction.
- Can I claim tax deduction for the principal component of the pre-EMI repayment of the home loan?
When you are paying pre-EMI on your home loan, only the interest component of the home loan is being paid back as the EMI. Since there is no principal repayment during the pre-EMI period, you cannot claim tax deduction on the principal component. Deduction for principal repayment is available under Section 80C of the Income Tax Act, 1961 only after regular EMI begins, and construction is completed, under the Old Tax Regime.
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