Ad-Free CAclubindia and Daily Updates on your mobile. Subscribe Now!

Interest on Loan

chandan (finance head) (42 Points)

19 February 2011

Loan is taken against the fixed deposits and that money is used for the pupose of purcahgse of house property. my query is whether the interest paid on loan taken against FDs can be claimed u/s 24?

is there any rule, notification , case?

Reply soon

Reply
Follow
Share

9 Replies

Pankaj Arora (Learner) (3134 Points)
Replied 19 February 2011

its does matter loan taken against FD or anything else. You can take deduction u/s 24 because you took it for house property.

Upgrade to CAclubindia Pro. Subscribe Now!

Milan Maheshbhai Lakhani (Article Clerk) (89 Points)
Replied 19 February 2011

Interest earned on Fixed Deposits will be chargeable to tax under income from other sources and interest paid on loan taken to purchase house property will be claimed as deduction u/s. 24 upto certain limit if the property if self occupied and without any limit if the property is let out.

Sumiti Jain (FP) (1364 Points)
Replied 19 February 2011

Originally posted by : Milan Maheshbhai Lakhani
	Interest earned on Fixed Deposits will be chargeable to tax under income from other sources and interest paid on loan taken to purchase house property will be claimed as deduction u/s. 24 upto certain limit if the property if self occupied and without any limit if the property is let out.

Srihari Manipatruni (student) (147 Points)
Replied 20 February 2011

Yes interest can be claim deduction U/s 24(b) upto rs 150000 .If the loan is taken for construction or purchase of housing property..........

CA. Lohith Jagadeesh (Proprieter) (907 Points)
Replied 20 February 2011

Hi,

Agree with all the above answers, however definately i have an opinion.

{ May be debatable}

All the above persons who have replied have considered the limits of Rs. 1.5 Lacs, for which i agree,

What if the the TOTAL INTEREST PAID WAS Rs.2.3 Lacs????

ISSUE

Claim Interest benefit of Rs. 1.5 lacs ( assuming Self occupied property ) under Sec 24

And the Remaining amount of Rs 80000/- under Sec 80 C,

Section 80 C says among other things

"However, Deduction under this clause is not eligible in respect of payments made towards

a) the admission fee, cost of share.........etc

b) the cost of any addition, alteration.......etc

c) ANY EXPENDITURE IN RESPECT OF WHICH DEDUCTION IS ALLOWABLE UNDER SECTION 24................"

NOW

Can we take a stand that since under Section 24 the deduction was only Rs.1.5 Lacs, and the further amount which was not claimed under section 24 of Rs.80000/- could be claimed under Section 80?????????

Pls reply with suitable arugements.

Thank you,

Regards
CA. LOHITH.J {Expert at CAclub INDIA}
B.Com,ACA,CS,(ICWA),SAPM Hons,ITF Hons

Upgrade to CAclubindia Pro. Subscribe Now!

Milan Maheshbhai Lakhani (Article Clerk) (89 Points)
Replied 21 February 2011

According to me, if the property is assumed to be self-occupied, then interest can be claimed only upto Rs. 150000/- and the balance interest expenditure can not be claimed under any other section. Rather than doing that, it is better to let out or deemed let out the property and claim the interest expenditure any limit.

CA. Lohith Jagadeesh (Proprieter) (907 Points)
Replied 21 February 2011

Hi,

Income Tax Act 1961

Section 24

Deductions from income from house property.

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 ³⁹[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:]

⁴⁰[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.]

IT MAY BE NOTED THAT THE SECTION DOES NOT START WITH

" NOT WITH STANDING ANY THING CONTAINED IN OTHER SECTION............"

THEREFORE THERE IS NO OVER RIDING SECTION CONFLICT BETWEEN SECTION 24 & SECTION 80 C.

ONE CAN CLAIM THE REMAINING AMOUNT WHICH WAS NOT CLAIMED UNDER SEC 24 AS A DEDUCTION UNDER SECTION 80C

Thank you,

Regards

CA.Lohith.J

B.Com,ACA,CS,(ICWA),SAPM Hons,ITF Hons;