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Interest on housing loan

Rachit (Analyst) (913 Points)

16 April 2013

Can Interest paid on Housing Loan be capitalised in the event deduction u/s. 24(b) is not availed by him?

Also can he claim the benefit of indexation of such capitalised interest amount at the time of sale of the asset?

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C.A. Sandeep Wawhal (CA, PGDFM, BCom) (1831 Points)
Replied 16 April 2013

Income Tax Act and Accounting standards both are differnent. Whether certail borrowing cost (say interest on housing loan) is capitalised or not is accounitng concept covered in Accounting Standard 16, must see. And whether such interest can deduct from assessee's total income is comes under income tax act/rule. Even you can capitalise borrowing cost but can not get deduction under I.T. Act or vise versa depends on each case.

Next is, indexation applicable in case of sale of long term asset. Indexation use to arrive at indexed cost of asset. In such actual cost shall includes such borrowing cost i.e. interest on housing loan. if you capitalized earlier. Refer Accounting Standard 16.