Income from house property

This query is : Resolved

Pravin Kumar Saharia (Querist)
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02 September 2008 Father of one of my client(working in MNC) is having a land in his name on which they have decided to construct house, now for the purpose of availing tax benefits by my client following modus operandi is proposed to be adopted –
1. Land, owned by client’s father, will be given on lease for 50 years to my client on payment of Rs.1000 p.m. as lease rent under a unregistered lease agreement.
2. Client will take loan for construction of house on this land from some bankers, in bank loan client will be co-applicant and part of construction cost will be borrowed from individuals on interest.
3. In order to pay installment of bank loan (principle), client will again take loan from individual on interest basis.

Query - Whether payment of installment to bankers, interest to lenders as per point no. 2 and point no. 3 will be eligible for deduction under Income tax act, if yes, pl. provide supported case law etc.

Late CA Sampat Jain

Late CA Sampat Jain (Expert)
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03 September 2008 THE SECTION ALLOWS INTERST where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital:

THERE IS NO BAR IF SOME ONE ELSE BECOME CO-APPLICANT

HOWEVER TO AVOID DISPUTES YOUR NAME SHOULD APPEAR FIRST AND IN THE RECEIPTS OF INTEREST