Loss on House Property

This query is : Resolved

Amol (Querist)
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04 January 2011 I am planning to buy a residential flat. But i am not availing any housing loan from financial institution. Apart from down payment, i will be paying to the seller, principal + interest from my salary on monthly basis.
Can i claim the amount of interest paid to him as "Loss from House property"?
If yes, what are the documents i need to obtain from seller?

Thanks

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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04 January 2011 The unpaid purchase price can be treated as capital borrowed for the purpose of acquiring the house property,and hence interest thereon is allowable as a deduction under section 24(b) of the Income tax Act,1961.
Citation :- CIT V Sunil Kumar Sharma (2002) 254 ITR 103 (P & H).

CMA. Subhash Kumar Jha

CMA. Subhash Kumar Jha (Expert)
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04 January 2011 The interest on house property is allowed u/s 24 of the I T Act . The said provision does not provide any restriction regarding the person from whom the loan for house purchase or construction should be taken . The said provision is as under :

Provided further that where the property referred to in the first proviso is acquired or constructed with capital borrowed on or after the 1st day of April, 1999 and such acquisition or construction is completed within three years from the end of the financial year in which capital was borrowed, the amount of deduction under this clause shall not exceed one lakh fifty thousand rupees.

Explanation.………….
Provided also that no deduction shall be made under the second proviso unless the assessee furnishes a certificate, from the person to whom any interest is payable on the capital borrowed, specifying the amount of interest payable by the assessee for the purpose of such acquisition or construction of the property, or, conversion of the whole or any part of the capital borrowed which remains to be repaid as a new loan.

Its very clear from the above provision the the only conditions for allowance of interest is that “the assessee furnishes a certificate, from the person to whom any interest is payable on the capital borrowed”. There is no mention regarding the Person from whom loan can be borrowed.

So the document required is : a certificate of interest.

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Amol

Amol (Querist)
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04 January 2011 Thanks Mr. Warrior and Subhash for your prompt reply.