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Need some clarification

n k abhiram (CA Final , CS Final ) (629 Points)

25 June 2010

Hello every body !!! One of our client is working in Pvt Co. for salary , he has got 2 residential sites, he has barrowed loan for construction but he has still not yet constructed the house, can he claim the deduction of interest which he is paying towards the loan under his Income from house property , (the loan was barrowed 3.5 yrs back) he is making payment EMI .

As per I Tax Act any assessee having 2 residential houses out of the two houses one has to deemed as let out , but in this case the property is not yet completed , what is to be done ?

Thanks is advance

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5 Replies

Amir (Learner) (4016 Points)
Replied 25 June 2010

Hi Abhiram,

Benefit of Loan is available from the year of completion of construction........

Till that time assesee will be treated as owner of one house property, which can be claimed as exempt....once construction is completed then one of the house property shall be treated as deemed let out...

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n k abhiram (CA Final , CS Final ) (629 Points)
Replied 26 June 2010

thank for the reply Mr Amir , My question is not when to claim but , whether is it possible to claim interest deduction for the property / vacant land under the head Income from house property

mohit pathak (Learner) (396 Points)
Replied 26 June 2010

Originally posted by : N K Abhiram

mohit pathak (Learner) (396 Points)
Replied 26 June 2010

dear N K Abhiram

as per the provision of income tax deduction of interest on capital borrowed is permissable only if the construction of the said house is compleated within three years from the end of the financial year in which such capital was borrowed.

Meaning of property :-(refer section 22)......................................an incomplete house or house which is in ruins without a roof and without the door can not be called a building - Baladeen v. lakhan singh AIR 1927 All.214.

the given situation falls under the above defination of building because it is not yet a house property so the questionof taxability of such house does not arise.

however ,if, the construction is completed within the eligible period then the said assassee can claim deduction of such perconstruction period interest in five equal installment , commencing from previous year in which the house is constructed.