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Rebate on housing loan interest if used for purchasing plot.

Saheb Rishab (Article/ Completed Training...) (98 Points)

31 January 2014

suppose I take a Housing Loan from Bank and purchase a vacant plot of land with it. i dont construct anything upon it. I also get a certificate from Bank regarding payment of principal & INTEREST of housing loan.. will i get rebate on payment of housing loan interest (150000/- or less) if i have not constructed the house.. Although i still hold Bank's certificate of payment of housing loan.. is a certificate enough to avail rebate??

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2 Replies

Syed Ali Reza (Assisstant Manager - A/c & Tax) (31 Points)
Replied 03 February 2014

Hi Rishab,

As per sec 24(b), deduction is allowed for interest on borrowed capital for acquisition or construction of property

As per sec 22 which is the charging section, property refers to Building or land appurtenant thereto. Which means, Building or Building along with Land attached with such building.

So to claim deduction u/s24(b) there should be a building or building along with land (if any) attached to such building.

Merely purchase of plot one cannot claim deduction u/s 24(b).

However, if one purchases a plot of land and constructs the building within 3 years from the date of getting the loan from the bank and interest paid on borrowed capital during such construction period can be claimed as deduction u/s 24(b) in 5 equal installments as pre construction period interest.

Both value of Building and Land = value of property.

Regards,

Ali

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swati ware (No) (39 Points)
Replied 10 March 2014

Hi,

Interest paid on loan taken for purchase of vacant land with the inention to sold the same as it is. Can we claimed the interest paid during the period of holding the assets (interest paid after aquisition of land) as cost of improvement and claimed the indexation benefit if sold after 36 months?

Thanx...