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Deduction u/s 24 (b) (Income Tax)

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This query is : Resolved

Author : Anonymous

( Author )
22 May 2012

Case : A residential plot of land is purchased by Individual (ROR) through bank loan 75% and own money 25% in MAY 2012. Then construction loan for this plot is taken from same bank in June 2012 and constructions is completed by DEC 2012.

Bank provides to borrower two certificates showing principal and interest portion repaid on two loan accounts under home loan scheme.

Can interest portion of EMI's paid on two separate loans be claimed as deduction u/s 24(b)?

What is treatement of principal portion repaid during the FY 2012-2013?


Siddhartha Bhardwaj

( Expert )
24 May 2012

1. Yes the interest under 2 different loans shall be allowed as deduction.

However, the interest paid BEFORE construction of house shall be allowed as deduction in 5 equal annual instalments.

2. The repayment of principal amount shall be allowed as deduction u/s 80C.


Author : Anonymous

( Author )
24 May 2012

Thank You Siddhartha.
But in present case construction is completed with in same FY, so is the rule of 5 equal instalment applicable ?


Siddhartha Bhardwaj

( Expert )
24 May 2012

The interest for the period May to December shall be interest for pre-construction period and shall be allowed in 5 equal instalments.

The interest for the period Dec to March, shall be allowed in full during the current year itself.


Author : Anonymous

( Author )
24 May 2012

Sec 24(b)says... where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital......how should we meant the word acquired and property here....does acquired cover plot purchase and then constructions completed from two bank loans.


Siddhartha Bhardwaj

( Expert )
24 May 2012

Acquired means an existing constructed house is purchased.

Purchase of plot and construction of house on it shall be covered under construction of property.

Income from House Property is applicable to a residential house property.

It does not apply to vacant land.

Accordingly property means house property.


Author : Anonymous

( Author )
02 June 2012

as per my understanding in this case 5 instalment rule does not apply because construction is completed before the end of same year.


Siddhartha Bhardwaj

( Expert )
04 June 2012

The interest payment shall be bifurcated into pre-construction period and post construction period.

For this purpose the DATE OF COMPLETION OF CONSTRUCTION shall be seen and not the Financial Year.

The fact that the construction has been completed BEFORE the end of the year does not mean that interest for the whole year shall be allowed as deduction in the current year itself.

The interest prior to completion of construction shall be allowed in 5 equal instalments and interest post construction shall be allowed in full in the current year itself.


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