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Pre-construction period interest

Ankit Rajpara (None) (27 Points)

08 August 2012

Assessment Year: 2012-13

Previous Year: 2011-12

The property is let out..

Construction completed on: 31-3-2007

Interest of the construction period: 10000

(I know that when the interest of construction period is given we can claim deduction in 5 equal installments)

My question is: Whether I should deduct Rs.2000/- (1/5th of 10000) or not?

If we deduct(1/5 of 10000) from 2006-07 than there won't be any exemption For the year 2011-12..

In the book it has been deducted but today our professor (who is a CA) said that it won't be deducted/exemped in 2011-12 because 5 years have already been completed.

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5 Replies

Arpit Pachisia (CA) (734 Points)
Replied 08 August 2012

Dear Ankit

You cannot claim any deduction in the previous year 2006-07. As the constructed was completed on 31.3.2007. You can start availing deduction of Rs. 2000 from the previous year 2007-08 onwards. So the 5 years will be 2007-08, 2008-09, 2009-10, 2010-11, 2011-12. Therefore you can deduct Rs. 2000 in the previous year 2011-12.

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Neha Jhanwar (article) (103 Points)
Replied 08 August 2012

agreed with above

Vignesh Shekar (Article Assistant) (66 Points)
Replied 08 August 2012

Yes, you can avail exemption in the previous year 2011-12, as it is calculated as per arpit's answer. Its right. U can claim exemption in that year. And one more thing. if the house is self occupied u can claim a negative income (interest portion) up to -150000/-. If the assessee has the normal interest paid in the year 2011-12 for 150000/- you can add this 2000 in excess of rs.150000/-. If it is a let out property the interest paid (housing loan interest) has no limit and with that this Rs.2000/- can be added upo. This is over and above the normal interest paid.

Ankit Rajpara (None) (27 Points)
Replied 08 August 2012

https://wirc-icai.org/wirc_referencer/income%20tax%20&%20wealth%20tax/Income%20From%20House%20Property.htm

According to the above link:

Interest for the period prior to acquisition or construction of the premises would be deductible in five equal instalments starting from the year in which property is acquired or constructed.

and the house construction was finished on 31-3-07(2006-07) So shouldn't we consider this year too?

CA D.C. Bansal (Accounts Head) (283 Points)
Replied 09 August 2012

You may avail deduction from the year 2006-07 and onwards. The deduction will be completed in 2010-11 and during the year 2011-12 no deduction for the expenses will be allowed.