Int on Loan borrowed for personal assets

This query is : Resolved

Vivek Randad (Querist)
Follow

24 August 2009 My friend is running a soleproprietorship concern for the past4 yrs. he has availed OD for the business purpose & housing loan for his aquiring a house. The interest on OD is debited to p&l account under finance charges & interest paid on housing loan Rs. 10lacs is debited to his capital account. Now he wants to reverse the interest portion debited to capital a/c by debiting/capitalizing house building. Is this correct treatment,Also is this int considered as cost of acquisition at the time of transfer of Building

chetan soni

chetan soni (Expert)
Follow

24 August 2009 No you can not add this interest to assets. If you still wish to add this interest, then you need to reverse all the benefits claimed u/s 24(b) in your earlier income tax returns. Show this by way of income under the head house property.

Your friend wish to do so to reduce the capital gains tax liability. right ?

If this is the case then you can instead add cost of improvement to reduce the liability.