499. Repayment of loans, etc., taken for purchase/construction of house – Whether deduction admissible under sub-clause (ii) of clause (b) of sub-section (2) where construction of house is still continuing during previous year relevant to assessment year 1988-89
1. I am directed to refer to para 4(8)(e)(ii ) of this Department’s Circular No. 489 [F. No. 275/51/87-IT(B)], dated 25-6-1987 [see under section 192] wherein the incentives provided under section 80C to the income-tax payers in respect of housing loans, etc., taken from specified institutions have been explained.
2. References have been received from some quarters enquiring whether the repayment of loans taken for the purchase or construction of a new residential house property, the construction of which is still continuing would qualify for deduction under section 80C.
3. According to the provisions of sub-clause (ii) of clause (h) of sub-section (2) of section 80C, in computing the total income of an assessee, a deduction shall be allowed for any sum paid towards the purchase or construction of a residential house property subject to the fulfilment of the conditions laid down therein. For the admissibility of this deduction, the construction of the house property should be completed after 31-3-1987 and the income from the same should be chargeable to tax under the head ‘Income from house property’ in the relevant assessment year. For the guidance of Drawing and Disbursing Officers and other persons responsible for the payment of income chargeable under the head ‘Salaries’, it is clarified that in a case where the construction of the property does not get completed by the end of the previous year relevant to the assessment year 1988-89, no deduction under this provision shall be admissible to the assessee in the assessment of his income for this assessment year. This aspect may please be kept in mind while deducting the tax at source under section 192 in the financial year 1987-88.
Circular : No. 498 [F. No. 275/111/87-IT(B)], dated 4-11-1987.