Income from house property

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Querist : Anonymous

Querist : Anonymous (Querist)

19 July 2014 my querey is regarding sec 24 .,(DEDUCTION UNDER HOUSE PROPERTY)
where housing loan taken, should from the financial institiutins or it can also be taken from private persons also??????
THANKS IN ADVANCE

Deepti Asawa

Deepti Asawa (Expert)
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19 July 2014 you can take loan from private persons also.

Message likes : 1 times

Querist : Anonymous

Querist : Anonymous (Querist)

21 July 2014 then it can acts as tax evasion.,
EX: how means i can get certificate from my brother showing i borrowed housing loan.,
then i can get interest as deduction u/s 24.,
IS IT RIGHT
THANKS IN ADVANCE

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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29 July 2024 Under Section 24(b) of the Income Tax Act, which deals with deductions on account of interest on housing loans for the purpose of "Income from House Property," the following guidelines apply:

### Eligibility for Deduction Under Section 24(b)

1. **Sources of Loan**:
- **Financial Institutions**: The primary source of housing loans recognized for tax deductions includes loans taken from banks, financial institutions, or housing finance companies.
- **Private Persons**: Loans can also be taken from private individuals, including relatives or friends. The Income Tax Act does not restrict the source of the loan to financial institutions alone.

2. **Documentation and Proof**:
- **Loan Agreement**: Whether the loan is from a financial institution or a private person, it is essential to have a valid loan agreement or document that outlines the terms of the loan, including the amount borrowed, interest rate, and repayment schedule.
- **Interest Payments**: Payments of interest on the loan must be documented, and receipts or bank statements should be maintained as proof. This applies regardless of whether the lender is a financial institution or a private person.

3. **Certification from Private Lenders**:
- **Formal Documentation**: If the loan is from a private person, it is advisable to have a formal written agreement. While an informal certificate from a relative like a brother may serve as a record, it is better to have a detailed agreement outlining the loan terms to substantiate the interest deduction.
- **Interest Deduction**: As long as the loan is genuine, documented, and interest payments are made, you can claim the interest deduction under Section 24(b) regardless of the lender’s identity.

### Important Considerations

1. **Tax Evasion Risks**:
- **Genuine Transactions**: Ensure that the transaction is genuine and not a façade for tax evasion. Fabricating loan documents or falsifying transactions can lead to legal consequences and penalties.
- **Documentation**: Maintain proper documentation for all transactions. This includes loan agreements, payment receipts, and other relevant documents to support your claim if required by tax authorities.

2. **Income Tax Compliance**:
- **Disclosure**: Disclose all loan-related details accurately in your income tax return. Include the interest deduction under Section 24(b) in the appropriate section of your return.

### Practical Example

- **Loan from a Brother**: If you borrow from a brother, you should have a formal agreement or documentation reflecting the loan amount, terms, interest rate, and repayment schedule. Ensure you make regular payments and keep records of these payments.
- **Interest Deduction**: You can claim the interest paid on this loan as a deduction under Section 24(b), provided the documentation is in order and the transaction is genuine.

### Summary

- Loans from both financial institutions and private persons are eligible for interest deduction under Section 24(b), provided proper documentation and proof of genuine transaction are maintained.
- Ensure all transactions are genuine and well-documented to avoid any issues with tax authorities.
- Formalize the loan agreement to substantiate the interest deduction and comply with income tax regulations.

If you have further questions or need assistance with documentation or compliance, consulting a tax professional or financial advisor is advisable.