vinaya (Student CA IPC / IPCC) (74 Points)
12 November 2015As per Section 24 of Income Tax Act 1961, is time limit of 3 years mandatory to complete the construction of House property? If the construction is yet in process even after completion of 3 years will the assessee be able to claim the Pre-Construction interest as deduction? If yes, Please give the clarification about that 3 years time limit provided in Sec.24. Thanks in Advance.
MG Rakshith
(IPCC)
(21 Points)
Replied 12 November 2015
The tax deduction for pre construction interest will be available only if the construction is completed within 3 years from the end of the financial year in which the loan was borrowed.
So yes, the 3 year time limit is mandatory.
vinaya
(Student CA IPC / IPCC)
(74 Points)
Replied 12 November 2015
Sir, proviso to Section 24 is as follows:
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 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 9[two lakh 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
Here, it is given that 3 years period is for current period interest, why can't we assume there is no such limit for pre construction period as nothing is mentioned in the explanation?
Karthik.V.Kulkarni
(Chartered Accountant)
(594 Points)
Replied 12 November 2015
MG Rakshith
(IPCC)
(21 Points)
Replied 13 November 2015
Hi,
I suppose I didn't elaborate it enough. What I meant is there is no time limit for pre construction interest. Suppose you start a construction on 2000 and finish it on 2010, you can claim the deduction for the whole of 10 years in 5 equal installments commencing from 2010.
However construction is not completed within 3 years of the end of the financial year in which capital was borrowed, Maximum allowable interest would be Rs.30000 only(subject to actual interest paid) in case of self occupied property.
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