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home loan from private individual - ded allowed or not?

sameera (student) (61 Points)

14 February 2011

dear all

i need your views from the learned members of this forum regarding the eligibility of deduction for the loan taken from the private individual as home loan

is deduction allowed only when we take the loan from the scheduled commercial banks or is allowed even when we take from the private individual also ? if deduction is allowed then are there any other conditions to be complied with, if so what are they and what is the procedure?

please i got very diffrent and conflicting opinions on this matter when i asked in real time CA persons

thank you

sameera

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6 Replies

Pankaj Arora (Learner) (3134 Points)
Replied 15 February 2011

you can take deduction of interest only but not of principal amount . If lender is charging interest.

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sameera (student) (61 Points)
Replied 16 February 2011

thank you

for that interest deduction is there any ceiling limit for amount?

please reply

Rachit (Ca-Final Article.) (565 Points)
Replied 16 February 2011

Miss Sameera

As per my knowledge if any person take loan for cons. of a house so he can claim ded. of both but in diff. sections as he can claim the ded.of Intt.U/s 24 of the income tax Act-1961 Under head house property Subject To condition that if loan taken Befor 01-04-1999 for Any purpose and house used as Self Occupied then ded. will be allowed of Max-30000 in a year and in case of loan taken after such date and hopuse is used for sam then you can claim ded. for 150000

In case of house used for Letting out purpose than there is no limit you can claim ded. of any amount.

and if loan sub. per acquisition intt. than ded. of same can also be taken in 5 Equal inst. Commencing from the date of/year in which the cons is completed and ded.of principal amount can also be claim under sec-80C sub . to max of Rs 100000 in a year..............

CA Punit GoSwaMi (Chartered Accountant) (310 Points)
Replied 16 February 2011

Yes You can clain deduction but your client should be having proper documents of loan...a certified copy from the person from whom he takes the loan..this is because an incometax office can ask for the loan documents for scruitiny purpose....

CA ADY (Chartered Accountant) (43 Points)
Replied 16 February 2011

any case laws in support of this??? please mention the case, if any.

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U S Sharma (glidor@gmail.com) (21063 Points)
Replied 18 February 2011

As mentioned above, the interest payments on home finance are allowed as a deduction to individual tax payer from their income of the year. To claim the benefit of interest payment in respect of home finance, the loan can be taken either from house finance institutions, banks or private lenders. There is no provision in the Income-tax Law to provide for a maximum rate of interest. Thus whatever interest has accrued to the tax payer in respect of residential house finance with loan the same would be allowed as a deduction. Such interest on loan for residential property or for let out property is allowed as a deduction irrespective of the fact whether the interest amount has actually been paid during the year or not paid or partly paid.

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