As far as tax incentives are concerned, it is better to prefer a ready-to-move flat over an under-construction property. Most of us are usually caught between two stools while making a decision to buy a ready-to-move flat or an under-construction property; however, if you wish to gain a tax edge on your purchase, it is advisable to buy a ready-to-move property.
As per the current taxation norms, this is how it works:
The principal amount paid is deducted from income under Section 80C of the Income Tax Act up to Rs.1 lakh. Besides, the interest paid for a loan on the ready-to-move property is eligible for a deduction up to Rs. 1.5 lacs under Section 24B of the Income Tax Act. And these deductions are only allowed for those properties that are ready for possession. Sadly, any under-construction property does not qualify for this Rs. 1 lakh deduction available for principal payments.
In simpler words, there is no service tax applicable for “Constructed properties”.
Therefore, when you are planning to buy a property, make sure you keep in mind that there is no service tax applicable for buying a ready-to-move properties, but for under-construction properties, a service tax is levied.