• Oct
  • 15
  • 2013

Deduction of Interest on Borrowed Capital From House Property income

Section 24(b) of the Act allows deduction from income from houses property on interest on borrowed capital as under:-

(i) the deduction is allowed only in case of  house property which is owned and is in the occupation of the employee for his own residence.However, if it is actually not occupied by the Assessee in view of his place of the employment being at other place, his residence in that other place should not be in a building belonging to him.

(ii) The quantum of deduction allowed as per table below:

Sl
No
Purpose of borrowing capital

Date of borrowing
capital

Maximum Deduction
allowable

1

Repair or renewal or reconstruction of the
house
Any time Rs. 30,000/-

2

Acquisition or construction of the house Before 01.04.1999 Rs. 30,000/-

3

Acquisition or construction of the house On or after 01.04.1999 Rs. 1,50,000/-

In case of Serial No. 3 above

(a) The acquisition or constructing of the house should be completed within 3 years from the end of the FY in which the capital was borrowed. 

(b) Further any prior period interest for the FYs upto the FY in which the property was acquired and constructed shall be deducted in equal installments for the FY in question and subsequent four FYs.

(c) The Assessee has to acquire before  a certificate from the person to whom any interest is payable on the borrowed capital specifying the amount of interest payable. In case a new loan is taken to repay the earlier loan, then the certificate should also show the details of  Principal and Interest of the loan so repaid.


5 Responses to “Deduction of Interest on Borrowed Capital From House Property income”

  1. Hemant Mistry says:

    As per my Knowledge there is no provision in the Income Tax Act which denies such claim of HRA and Interest . It is stated that it should be explainable to the assesing officer.

  2. Kannan says:

    It is incorrect to say that Rs.30,000/- is allowable for repair, renewal or reconstruction of the house carried out at any point of time. The second proviso to Section 24(b) clearly restricts the allowability of interest on borrowed capital only for acquisition or construction effected on or after 1/4/1999. Therefore, no interest on capital borrowed on or after 1/4/1999 and is used against repair, renewal or reconstruction is allowable.

  3. Amit Kumar says:

    Very informative. thanks

  4. VINAY MAKKAR says:

    I think the provisions refered here are only applicable in case of Employer giving benefit of Loss from House Property while computing Taxable Income for TDS on Salaries. Interest on borrowed capital is not limited by these provisions if the house property has been let out.

  5. payroll says:

    Informative article
    I would like to add that many employees do not know these provisions and try to claim both HRA and interest while living in the same city. this is not advisable.

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