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INTEREST ON HP

Harish Chandra Sahoo (Dy. Manger Accounts) (66 Points)

09 June 2010

Hey any one can help me on this regards

Can we claim deduction U/s. 24B if Interest Payable as on that financial year and not paid latter before or after due date of return.

If we claim the interest but not paid at all then what are the consequences.

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6 Replies

SRINIVASA MURTHY (Asst Manager (Finance)) (186 Points)
Replied 10 June 2010

U/s 24B Interest on borrowed capital is allowable as deduction on accrual basis, even if the books of account are kept on cash basis, it should be claimed as dedcution on yearly basis, even if the interest is not actually paid during the year.

the interest claimed as deduction and which has not paid by the assessee, and he has been waived from the burden of payment of interest on loan taken, such portion of interest will b treated as income in the year in which the burden of interest payment is waived.

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Neha (Article) (118 Points)
Replied 10 June 2010

Originally posted by : SRINIVASA MURTHY
	U/s 24B Interest on borrowed capital is allowable as deduction on accrual basis, even if the books of account are kept on cash basis, it should be claimed as dedcution on yearly basis, even if the interest is not actually paid during the year. the interest claimed as deduction and which has not paid by the assessee, and he has been waived from the burden of payment of interest on loan taken, such portion of interest will b treated as income in the year in which the burden of interest payment is waived.

dear murthy ..

wud u plz clarify the treatment of waiver of interest burden...

regards

neha

SRINIVASA MURTHY (Asst Manager (Finance)) (186 Points)
Replied 10 June 2010

Dear Neha

you want accounting treatment r tax treatment?

Neha (Article) (118 Points)
Replied 10 June 2010

sir

tel me both

SRINIVASA MURTHY (Asst Manager (Finance)) (186 Points)
Replied 10 June 2010

it is like this,

for accounting purpose the total interest wht you have paid/payable will be treated as expenditure and will b booked.

but for income tax, the treatment is different for Self occupied HP and Let out HP.

if the property is a self occcupied property where the capital borrowed after 1-4-99, the max permissible interest is Rs.150000/-

for letout property there is no such restriction, the actual interest paid/payable will b allowed.

plz consider following illustration:

mr.X has borrowed funds from "S" bank for his HP, the agrred interest rate at the time of saction is 8%, but the bank started charging the interest @ 8.25% after some time due to change in the bank interest rate. The barrower has approached banking ombudsmen for settlement. The ombudsmen has decided the case and awarded the verdict in favor of the barrower

now in this situation, the assessee is eligible to claim @ 8.25%, though he may not actually pay the interest, but if the settlement is done for 8%, then he should treat that excess claim as income in the year in which tht settlement done, and liable to tax.