Tax deduction under section 24

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kartikey (Querist)
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26 April 2011 Sir
Me and wife are government servants. My wife bought a house in her name and to buy this house she took loan from me. now can she claim tax deduction under section 24 for interest she is paying to me. Under what subsection it is permitted

RANGA SRINIVAS

RANGA SRINIVAS (Expert)
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26 April 2011 Dear

The text of the section is given below. However the interest received from your wife is taxable in your hands

regards

ranga K S

Deductions from income from house property.

24. Income chargeable under the head “Income from house property” shall be computed after making the following deductions, namely:—

(a) a sum equal to thirty per cent of the annual value;

(b) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital:

Provided that in respect of property referred to in sub-section (2) of section 23, the amount of deduction shall not exceed thirty thousand rupees :

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 50 [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.—Where the property has been acquired or constructed with borrowed capital, the interest, if any, payable on such capital borrowed for the period prior to the previous year in which the property has been acquired or constructed, as reduced by any part thereof allowed as deduction under any other provision of this Act, shall be deducted under this clause in equal instalments for the said previous year and for each of the four immediately succeeding previous years:]

51 [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.

Explanation.—For the purposes of this proviso, the expression “new loan” means the whole or any part of a loan taken by the assessee subsequent to the capital borrowed, for the purpose of repayment of such capital.]

CA. BIJENDER KR. BANSAL

CA. BIJENDER KR. BANSAL (Expert)
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26 April 2011 Unlike section 24(b), Section 80C doesn’t allow any tax deduction for home loans taken from friends and relatives. For claiming tax benefit on principal component of the home loan under section 80C, you’re required to borrow only from the lenders specified in that section.

There is no such restriction under section 24(b) of the IT Act for claiming tax benefit on interest component of the housing loan.

i.e your wife can take deduction of interest u/s 24 , but she can claim principal deduction u/s 80C

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