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I took a loan to buy a house that may get completed by March 2006.

If not, I cannot claim any tax benefit for this financial year, right?

Even if the entire house is incomplete, can I just complete construction of one room and legally say that I have completed construction?

 - Binu B

You are right. You will only get tax benefits from the year in which construction is complete.

If the house is not complete by March 31, 2006, you will not be eligible for any tax relief with respect to home loan installments for the financial year April 1, 2005 to March 31, 2006.

 Let me try and answer your query as far as completion of construction is concerned.

I had once got an interesting query from a reader asking me what the definition of 'completion of construction' was. This was with regard to an apartment being sold by a builder.

He wanted to know which one would satisfy the income tax authorities for claiming the tax benefits on home loans.

1. A completion certificate by the builder?

2. A completion certificate by the local municipal authorities?

3. Any other?

No doubt, it was a very interesting question.

I have not been able to come up with a single case law on this topic (seems like even in litigatious India, some things are not litigated).

In my opinion, the common sense definition of completion of construction -- when the apartment is ready for occupation as is commonly understood -- should be acceptable.

Proof that you (a tenant) are actually staying in the apartment should be sufficient at least for income tax purposes.

But, as I have said, this has not been tested in any legal forum.

Fortunately, the proof of completion of construction need not be filed with the return; this issue will arise only if it is specifically raised by the assessing officer.

As far as your question on completion of a room is concerned, unless you can show that the room is an independent unit, I don't think it can be classified as a house property.

In any case, even if it is treated as an independent unit, the tax benefits will be available only on that portion of the loan that can be considered to be on account of the room.

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