Hi friends. I have a doubt regarding allowability of interest on interest on unsecured loans.i.e., i have taken an unsecured loan and the interest accrued was added to loan amount because of non payment of interest. Next year i have calculated interest on the whole amount(principal+interest). Whether the interest on interest allowed as deduction u/s.36 of the IT Act,1961?.
1 Replies
Anumanchipalli Sathikonda
(Tax Consultant)
(1559 Points)
Replied 19 April 2011
Mr.Krishna Prasad
The deductibility of the imugned interest depends on the following two points-
(1) The terms and conditions of the borrowal i.e. the payment of interest is on simple interest method or cumulative interest method
(2) The method of account regularly followed by the assessee.
Best Wishes
Sathikonda
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